Australian Dollar Nosedives as Fed Spooks Markets

Australian Dollar (AUD) Slumps as Fed Spooks Markets

The Australian Dollar (AUD) slumped on Thursday after Wednesday’s US Federal Reserve monetary policy meeting. The bank spooked investors after it posted its bleak economic forecast for the world’s largest economy and said that interest rates would remain near zero.

Deteriorating relations between China and Australia also weighed on the ‘Aussie’ and prevented the currency rising against the New Zealand Dollar (NZD).

Looking ahead, the Australian Dollar could extend its losses today if risk appetite amongst investors continues to decline.

Pound (GBP) Slides Ahead of April’s Growth Data

The Pound (GBP) was under pressure yesterday, despite making gains against riskier assets such as AUD.

However, any gains were limited as the UK’s departure from the European Union remained the largest headwind for the currency, leaving the currency on track to end its longest winning streak against the US Dollar (USD) in two and a half years.

Looking ahead, Sterling is likely to slump further today as April’s growth data is expected to show a record decline due to strict coronavirus lockdown restrictions.

Euro (EUR) Hits Three-Month Highs

The Euro (EUR) rose on Thursday, bouncing back to hit three-month highs overnight following the US Federal Reserve meeting.

The single currency put up the best fight of any major currency following the meeting, with markets flocking to safe-haven assets as risk appetite plummeted.

However, the Euro could give these gains up following the release of industrial production data. If April’s production plummets further than expected due to the coronavirus pandemic, EUR sentiment could be left dampened.

US Dollar (USD) Rebounds from a Three-Month Low

The US Dollar (USD) rose on Thursday as market sentiment soured, rebounding from a three-month low it hit in the previous session.

The Federal Reserve’s dismal projections dampened risk appetite and sent traders flocking back to the safe-haven US Dollar. US jobless claims also weighed on sentiment as another 1.5 million Americans lost their jobs and forecasts suggest it will take the labour market years to recover.

Looking ahead, the US Dollar could continue to benefit if traders continue to flock back to the safe-haven currency.

Canadian Dollar (CAD) Slides as Oil Prices Fall

The Canadian Dollar (CAD) edged lower on Thursday as oil prices were hit by another record build-up in US crude inventories and weak Federal Reserve projections. Inventories jumped by 5.7 million barrels in the week to 5 June, which weighed on the oil-sensitive ‘Loonie’.

The Canadian Dollar could slump further today if oil prices continue to slide as traders worry about weak economic projections.

New Zealand Dollar (NZD) Slumps as Traders Flock to Safety

The New Zealand Dollar (NZD) slumped against a handful of currencies on Thursday but was able to edge higher against the Australian Dollar (AUD) and Canadian Dollar (CAD). Weak economic projections from the Fed weighed on the ‘Kiwi’ after the US central bank said it expects the US economy to shrink by -6.5% in 2020.

Looking ahead, NZD is going to continue to react to any further fluctuations in risk appetite.

Upcoming Data

 

June 12th 17:00                  GBP                        GDP (April)                                                          -24%

June 12th 17:00                  GBP                       Industrial Production (April)                        -22%

June 12th 17:00                  GBP                       Manufacturing Production (April)              -21%

June 12th 17:00                  GBP                       Construction Output (April)                         -38.7%

June 12th 20:00                  EUR                        Industrial Production (April)                        -31.2%

Louisa Heath

louisa.heath@torfx.com


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