Australian Dollar (AUD) slumps as RBA delivers dovish rate hold
The Reserve Bank of Australia (RBA) struck a dovish tone with its interest rate decision yesterday, sharply weakening the Australian Dollar (AUD).
While the bank kept rates unchanged as expected, its accompanying statement indicated a neutral bias – a clear shift from previously favouring further tightening. In response, investors began to speculate on when the RBA may cut rates and the ‘Aussie’ plummeted.
Later this morning, the RBA is due to publish its latest chart pack, reflecting its forecasts for the Australian economy. Downbeat news could pile further pressure on AUD exchange rates.
New Zealand Dollar (NZD) hits multi-month lows due to AUD correlation
The New Zealand Dollar (NZD) plunged alongside the ‘Aussie’ yesterday, striking multi-month lows against some peers, due to NZD’s close correlation with AUD.
In addition, the RBA’s dovish pivot prompted expectations that the Reserve Bank of New Zealand (RBNZ) may also take a more dovish approach to monetary policy.
Today, NZD could trade in a muted capacity as data releases are few and far between.
Pound (GBP) mixed as analysts debate BoE rate cut timing
Yesterday, in lieu of any domestic releases, the Pound (GBP) fluctuated as investors considered when the Bank of England (BoE) may begin to cut rates.
Ahead of Thursday’s decision, investors have begun to expect that the BoE may begin to loosen its policy in June. August also remains a consideration, with the lack of consensus bogging Sterling down as investors awaited further direction.
The UK’s latest inflation data is due today. With both the core and headline rates expected to have decelerated in February, GBP exchange rates could plunge.
Euro (EUR) uninspired by improving German outlook
Although the German ZEW economic sentiment index rocketed to its highest level in more than two years, the Euro (EUR) failed to fully capitalise on it yesterday.
The shock print of 31.7 in March belied lingering concerns about the health of the Eurozone’s largest economy. The economic situation remained bleak, softening the improved figure’s appeal, thus weighing on EUR.
Tonight, European Central Bank (ECB) President Christine Lagarde is due to speak. If she maintains the ECB’s dovish rhetoric, the common currency could fall.
US Dollar (USD) underpinned by reduced Fed cut bets
The Federal Reserve’s upcoming interest rate decision remained the main driver of movement for the US Dollar (USD) during yesterday’s trade.
Expectations that the Fed may push back on bets for a June rate cut cushioned the ‘Greenback’ against its peers. However, a lack of other data releases saw USD trim its gains over the course of the session.
During today’s session, USD may endure muted trade as investors stay put ahead of the Fed decision tomorrow morning.
Canadian Dollar (CAD) struggles as inflation cools
Cooler-than-expected inflation data weighed on the Canadian Dollar (CAD) yesterday, as both the core and headline rates were found to have decelerated in February.
Canadian data releases are set to taper off today, which could see the ‘Loonie’ extend its post-inflation losses. Any movements in the oil market could also drive volatility in the crude-linked currency.
Data Releases
Mar 20th 10:30 AUD RBA Chart Pack
Mar 20th 17:00 GBP Inflation Rate (Feb) 3.5%
Mar 20th 18:45 EUR ECB President Lagarde Speech