Australian dollar (AUD) slumps following dovish rate cut
The Australian dollar (AUD) plunged to multi-week lows yesterday after the Reserve Bank of Australia’s (RBA) cut interest rates at its latest policy meeting.
Although a rate cut was priced in by markets, AUD investors were surprised by the RBA’s more cautious outlook, including downgraded growth projections and hints at more easing to come.
Today, the ‘Aussie’ may remain subdued in the wake of the dovish RBA decision, although any shifts in risk appetite could potentially drive movement.
New Zealand dollar (NZD) weakens in tandem with AUD
The New Zealand dollar (NZD) also took a hit following the RBA announcement yesterday, due to the ‘kiwi’ dollar’s strong positive correlation with the ‘Aussie’.
New Zealand’s latest trade figures may affect NZD exchange rates this morning. Elsewhere, risk appetite could impact the New Zealand dollar.
Pound (GBP) stumbles amid BoE commentary
The pound (GBP) softened yesterday following mixed comments from Bank of England (BoE) Chief Economist Huw Pill.
Although Pill – one of the dissenters who voted against a rate cut earlier this month – argued the pace of policy easing has been ‘too rapid’, he also said he believes the path for rates remains ‘downward’ as the ‘underlying disinflation process remains intact’.
Turning to today, all eyes are on the UK’s latest consumer price index. Inflation is expected to have jumped in April, which may dampen BoE rate cut bets and boost the pound.
Euro (EUR) wavers as German PPI declines
The euro (EUR) was mixed yesterday, initially firming amid a weaker US dollar (USD) and a risk-averse market mood.
However, EUR was unable to sustain its upside during European trade as a steep drop in German producer prices fuelled bets on more European Central Bank (ECB) interest rate cuts.
Eurozone economic data is thin on the ground today, potentially leaving the euro without a clear directional bias.
US dollar (USD) subdued in wake of credit downgrade
The US dollar wavered yesterday as the US credit rating downgrade from Moody’s on Monday continued to pressure the ‘greenback’.
USD attempted a modest recovery as the session unfolded, with a gloomy mood providing safe-haven flows, but the currency slipped again when US markets opened.
Looking ahead, today’s session brings a lack of notable US data. As a result, lingering concerns over the US economy or debt levels could pressure the ‘greenback’, while any trade news from Donald Trump could also trigger movement.
Canadian dollar (CAD) buoyed by hotter inflation
The Canadian dollar (CAD) firmed against weaker peers yesterday after Canada’s latest CPI came in higher than forecast, with core inflation unexpectedly rising from 2.2% to 2.5%. However, falling oil prices tempered the commodity-linked currency’s potential.
In the absence of market-moving Canadian data today, CAD’s movement may be determined by oil price dynamics.
Data releases
08:45 NZD Balance of Trade (Apr)
16:00 GBP Inflation Rate (Apr)