Despite the Reserve Bank of Australia (RBA) cutting interest rates to a fresh low the Australian Dollar was able to quickly regain lost ground against its rivals.
This Week’s Australian Dollar Exchange Rates:
Pound Sterling to Australian Dollar (GBP/AUD) –
Week’s High: 1.7609
Week’s Low: 1.7374
US Dollar to Australian Dollar (USD/AUD) –
Week’s High: 1.3342
Week’s Low: 1.3099
Euro to Australian Dollar (EUR/AUD) –
Week’s High: 1.4869
Week’s Low: 1.4600
New Zealand Dollar to Australian Dollar (NZD/AUD)
Week’s High: 0.9560
Week’s Low: 0.9404
RBA Rate Cut Failed to Keep Australian Dollar on Bearish Trend for Long
Although it was largely anticipated, the ‘Aussie’ still slumped in response to the news that the Reserve Bank of Australia (RBA) had cut interest rates from 1.75% to 1.50%. However, markets were relatively sceptical of the impact that this move will ultimately have, prompting the antipodean currency to rapidly regain ground against rivals.
Confidence in the robustness of the domestic economy was also encouraged by a much stronger-than-expected Services PMI. This economic indicator suggested that the services industry had grown strongly in July, a positive sign for Australia as it tries to move onto a post-mining footing. Increased reliance on the service sector would enable the ‘Aussie’ to more effectively shrug off the influence of weak commodity prices.
Risk appetite has been on the up despite hawkish commentary from members of the Federal Open Market Committee (FOMC), with investors still dismissive of the chances of the US central bank raising interest rates before the end of the year. This has lent further support to the Australian Dollar, with commodity prices climbing higher.
Stronger Australian Business Confidence Could Boost ‘Aussie’
Looking ahead, the ‘Aussie’ could see some weakness in response to the NAB Business Confidence Survey for July. Sentiment is expected to have slipped from 6 to 5 due to worries over the outlook of the domestic economy, and the threat of another potential ratings downgrade. If businesses are found to have taken a more optimistic view of the future, however, the Australian Dollar could find another rallying point.
Also of interest will be the latest gauge of Chinese inflationary pressure, thanks to the influence of the world’s second largest economy on commodity prices and risk sentiment. Expectations are for the Consumer Price Index to have strengthened on the year in July, a result which could prompt stronger demand for the ‘Aussie’.