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Australian Dollar falls after the RBA monetary policy statement

BY BRETT OTTAWA

Investors were left disappointed yesterday after The Reserve Bank of Australia failed to deliver the hawkish stance on rates many had expected. Whilst keeping the official cash rate unchanged at 1.5 percent, in most part a neutralised statement followed with policy makers  presenting an equally balanced argument for hiking or in fact reducing rates. Whilst making specific reference to how a stronger Australian dollar would complicate the domestic economies transition away from the mining boom, the AUD was heavily sold in the aftermath, reaching an eventual low of 0.7591 when valued against its US Counterpart. Opening this morning notably lower at a rate of 0.7603 the release of minutes from the Federal Reserve’s most recent meeting this evening represents the biggest risk event of the next 24 hours. 

The New Zealand Dollar trading was light on yesterday and traded in a tight range as the United States were on holidays for Independence day. Opening Tuesday morning at 0.7292 against the US Dollar, the Kiwi traded to an intraday low of 0.7262 despite NZIER Business Confidence remaining steady in the June Quarter. Sideways movements continued to the domestic close before the latest GlobalDairyTrade Auction saw a drop in the price index by 0.4%. Despite the drop we saw little impact on the NZD/USD post auction, with an eventual pairing of losses overnight to see the New Zealand Dollar open this morning at 0.7290.

In a mostly benign overnight trading session with the Americans observing their Independence holiday, the Sterling extended its’ slow decline against the USD moving to as low as 1.2912. Coalescing at 1.2925 this morning, the Pound shed more of its gains against the greenback as the Construction PMI also came in slightly below forecast. With the UK services PMI due today, the Cable may have more to lose if the numbers again come in under expectations, threatening the previously hawkish undertone of Governor Carney.  With the PMI numbers unsupportive of Carney’s broader narrative of sufficient growth for an unwinding of accommodative monetary policy. Traders now look to the G20 meetings, which kick off this Friday with particular interest for possible clues. 

Was a quiet session overnight with US traders enjoying the Independence Day holiday. Looking ahead today all attention will turn to the upcoming Federal Open Market Committee (FOMC) Minutes in the US. If the minutes are more hawkish than expected, confident that inflation will move higher, could confirm their tight monetary policy intentions lifting rates in the near future. Against the Euro overnight the Greenback edged higher reaching a high of 1.1376. The EUR/USD pair is currently trading at 1.1354. We now expect any upward push will likely meet resistance around 1.1380. The Pound Sterling also lost ground against the US dollar down to 1.2911, its lowest since last Wednesday.