- AUD Advances after RBA Decision – Rises above 0.74 versus USD
- GBP Rallies – ‘Brexit’ volatility highlights trader fickleness
- USD Cools on Uncertain Fed Outlook – Yellen speech neither hawkish nor dovish
- AUD Forecast to Fluctuate – China’s trade data to provoke movement
Australian Dollar
As had been predicted by the majority of analysts, the Reserve Bank of Australia (RBA) opted to keep the overnight cash rate unchanged at 1.75%. The record-low interest rate was only recently cut, which should mean a period of stability as the central bank assesses the impact of current stimulus measures. Additionally, the reduced odds of a near-term Federal Reserve cash rate increase has eased pressure on RBA policymakers.
However, the bullish ‘Aussie’ (AUD) is an unwanted consequence of holding rates. With overvaluation a pressing concern for the RBA, there is potential for stimulus being revised in the near future.
Today’s session is likely to see significant AUD exchange rate volatility as traders react to the latest trade data from China. As the session progresses, Australia’s Home Loans, Investment Lending and Value of Loans data may also be impactful.
Sterling
Sterling volatility and the currency’s increased sensitivity to EU referendum developments highlights trader fickleness, as the Pound has seen massive price swings in response to divergent opinion polls. The British asset is now trading in the region of where it ended last week.
Yesterday’s Asian session saw the Pound spike versus its currency rivals despite the lack of an obvious catalyst. The appreciation has been attributed to a mistaken trade, or ‘fat finger’ trade that saw a programme to buy or sell currencies unintentionally triggered. Today’s UK Manufacturing/Industrial Production figures may spark AUD/GBP exchange rate movement.
Euro
The Euro tumbled versus most of its peers overnight as traders prepare for the European Central Bank’s (ECB) corporate bond-purchasing programme to begin. Many economists fear that the purchase of corporate bonds will have little benefit in terms of bringing Eurozone inflation back to target.
European ecostats produced positive results, however, led by better-than-expected Eurozone growth in the first-quarter. The positive revision to first-quarter Eurozone growth was attributed to investment and heightened consumption.
US Dollar
The recent speech from Federal Reserve Chairwoman Janet Yellen did little to alleviate uncertainty regarding the timing of a US interest rate hike. Whilst Yellen suggested that there is greater need to be cautious following the disappointing Non-Farm Payrolls report, she asserted that a near-term gradual increase is still on the cards.
The speech did little to boost sentiment towards the US Dollar, with the chance of a June Fed rate hike at just 2%. The likelihood of a cash rate increase in September jumped higher to 42%, however.
Canadian Dollar
Overnight crude oil prices extended gains thanks supply interruptions in Nigeria and a weaker US Dollar. However, the Canadian Dollar failed to take advantage having registered losses versus most of its peers.
The lack of ‘Loonie’ (CAD) appreciation is likely due to mounting concerns that Canada’s export growth will be significantly battered by the raging wild fire that engulfed the oil sands region. Also, traders will be reluctant to invest heavily in the Canadian Dollar ahead of labour market data due late on Friday night.
New Zealand Dollar
Improved market sentiment, thanks to rising global equity values, allowed the New Zealand Dollar to register gains versus many of its peers. Speculation of long-term delays to a Fed rate hike also supported demand for the ‘Kiwi’ (NZD).
The New Zealand Dollar is holding a weakened position versus the Australian Dollar amid speculation that the Reserve Bank of New Zealand (RBNZ) will cut the overnight cash rate on Thursday morning.
Data Released
June 8th 00:00 CNY Foreign Direct Investment
June 8th 00:00 CNY Trade Balance
June 9th 07:00 NZD Reserve Bank of New Zealand Rate Decision
June 11th 00:00 USD University of Michigan Confidence