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Australian dollar dragged lower following aggressive RBNZ rate cut
AUD - Australian Dollar
The Australian dollar was hit hard yesterday during Wednesday’s local trading session as the local currency was crushed to its lowest levels again since 2009. Opening at 0.6760 against the greenback, price action occurred following the surprise decision across the Tasman by the RBNZ to cut interest rates by 0.5% to 1%. The Australian dollar was pulled down with its neighbour as the AUD/USD saw intraday lows hit 0.6686.
With Central Banks around the world continuing to ease rates, eyes will be on the RBA next month following the decision to leave interest rates on hold at Tuesdays meeting. The RBNZ decision could place further pressure for the RBA to act in a similar aggressive approach as domestic economic activity remains weak. Markets are currently pricing a 70% chance of a 25bps cut at September’s monetary policy meeting.
Importers will wake to a sigh of relief as losses were paired overnight with any movement higher likely to be dependent on today's Chinese trade balance release. From a technical perspective, the AUD/USD pair is currently trading at 0.6755. We continue to expect support to hold on moves approaching 0.6680 while now any upward push will likely meet resistance around 0.6800.
Key Movers
Global growth and trade tensions between the United States and China are persisting to be the main drivers for currency markets. The Japanese Yen rose to eight-month highs overnight against the greenback and the Swiss Franc also gained traction as safe haven currency plays are a popular trade at present. Central banks globally are maintaining more dovish tones as not only did New Zealand aggressively cut their interest rates by 50 basis points, but India and Thailand followed suit in lowering their interest rates on Wednesday.
10-year yields declined at one point to three-year lows as global economic downturn concerns & speculation of fed reserve rate cuts saw markets on edge. Equities were flat overnight despite the S&P 500 and Dow being down more than 1% at one point.
We are light on data releases for Thursday as Chinese Trade Balance figures is the main macro print scheduled today. Markets look towards Fridays release of Chinese inflation figures and the RBA Monetary Policy Statement release.
Expected Ranges
AUD/USD: 0.6680 - 0.6820 ▼GBP/AUD: 1.7700 - 0.8200 ▼
AUD/NZD: 1.0420 - 1.0550 ▲
AUD/EUR: 0.5960 - 0.6080 ▼
AUD/CAD: 0.8940 - 0.9040 ▲