Australian dollar boosted as odds for another rate cut ease
Friday 21 June, 2019
Daily Currency UpdateThe Australian dollar received a boost on Thursday following a speech delivered by the Reserve Bank of Australia Governor Philip Lowe at the Committee for the Economic Development of Australia in Adelaide. Governor Lowe said that to expect a further interest rate cut was ‘not unrealistic’ and acknowledging that low interest rates can help boost pricing power, however, monetary options were not the only option and the recent rate cut would not be enough to revive economic growth. Lowe has also called for the government to take action where traditionally the RBA avoids commenting on fiscal policy.
This led markets to narrow their odds on another rate cut as early as July and saw the AUD/USD benefiting and moving upwards towards 69c. The Aussie also received a lift overnight from the Federal Reserve softening their stance recently.
Looking ahead, locally we see the release of Flash Manufacturing and Flash Services PMI and with the US-China trade war still front and centre we could see limited upside for the pair as the Aussie is highly leveraged to the Chinese economy. From a technical perspective, support sits at 0.6890 followed by 0.6850, on the flip side, strong resistance is sitting at 0.7000 followed by 0.7060.
Key MoversUS dollar extended its decline on Thursday against most majors, GBP/USD rose 0.5% on the day and EUR/USD added 0.6% over the day. US equities hit record highs with the S&P 500 stock index closing at an all-time high on Thursday, following the Federal Reserve's announcement on Wednesday that it would consider cutting interest rates to keep the economy in expansion mode.
US data Philly Fed Manufacturing Index tumbled to 0.3 after registering a four-month high of 16.6 in the prior month. The report follows a disappointing regional manufacturing report from the New York area as well, after the Empire State Manufacturing survey earlier this week also registered a steep drop.
Over in the UK, the Bank of England kept rates steady at 0.75% and has cut the growth outlook saying it expects economic growth to be flat in the second quarter of the year. The committee said the downgrade in part reflected an easing of stock-building ahead of Brexit deadlines.
- AUD/USD: 0.6850 - 0.6940 ▲
- GBP/AUD: 1.8240 - 1.8500 ▲
- AUD/NZD: 1.0420 - 1.0550 ▼
- AUD/EUR: 0.6070 - 0.6160 ▼
- AUD/CAD: 0.9050 - 0.9180 ▼