The Australian Dollar opens this morning as one of the worst performing currencies in overnight trading, shedding 45 points to 0.73. The Aussie did recover slightly however, to open this morning at 0.7308 after commodity prices and a softening USD supported the Aussie somewhat.
The catalyst for the fall was driven by Westpac’s decision to raise variable mortgage rates by 14bps, the first of the four major banks to do so. Westpac cited short-end funding costs as the reason for the increase with the BBSW rising 16bps in the 3-month bank bill market. Australian markets responded almost immediately with bond markets also feeling the pinch. Analysts suggest the fall may have implications on the RBA’s interest rate guidance with an even slimmer chance of an interest rate hike now on the cards. Currently, the first hike is now priced for Q3 of 2020.
It wasn’t all negative news for the Aussie however with a stark recovery in commodity prices driving demand for the currency. While only marginally affecting the Aussie, the currency did manage to hold above the 0.73 mark with the support of commodity markets. Demand for the Pair was also heightened as market concerns over a tariff ridden world slowly subside on the news that the US is brokering new deals in North America. The news supported a risk-on market sentiment that saw demand for the Aussie continue to build. Nevertheless, none of the news could help the Aussie too much as it opens this morning firmly focused on interest rates.
The Aussie now turns to Private Capital Expenditure and further headlines to drive direction this Thursday.