The Aussie Dollar has weakened off the back of the RBAs decision to cut Interest rates but has gained some ground due to external economic factors. The RBA may look to cut rates further in the near future which would be a bonus for those looking to buy AUD.
The Australian dollar appears to have bottomed out after taking sharp falls over the last month and in particular the last week after the Reserve Bank of Australia surprised the markets with that interest rate cut by 0.25% down to 1.75%. The dollar has found support after a spike in the price of oil due to production disruptions principally in Canada after the wildfires in Alberta as well as ongoing problems in Nigeria with attacks on oil facilities. However, the reduction in supply is expected to be short-lived which means the dollar may have that bit further to fall still. A move to $2 for GBPAUD seems possible with such a long list of global problems. The Australian dollar as a commodity currency performs better when the global economy is performing well, and when commodity prices are going up.
Aside from global issues, the Reserve Bank of Australia have been concerned with the recent strength of the dollar and this is something they won’t want to see a repeat of. As such going forward expect further rates cuts or additional stimulus to keep the dollar weak when required. Data is light as we end the week so eyes look forward to the highly anticipated Reserve Bank of Australia minutes next week considering the surprise cut almost two weeks ago and which could carry some risk for the Aussie.