The Reserve Bank of Australia (RBA) will release its Monetary Policy Statement tomorrow which could create some volatility for the Australian Dollar. Today's forecast looks into the potential implications of a dovish speech on the Aussie; the table below shows the potential difference in AUD return when selling £200,000.00 during trading hours yesterday.
|Currency Pair||% Change||Difference on £200,000|
The report which reviews economic and financial conditions is used a clear guide to future policy by the RBA. Considering the RBA held rates this week at 1.5% and cited a weak housing sector this next report could offer some more clues as to the overall health of the Australian economy.
Any negative commentary could prove harmful for the Aussie Dollar especially if those expectations for the next interest rate increase are kicked further into the long grass. Although Governor Philip Lowe has indicated the next movement would likely be upwards he has given no clues on timing. The important point to note is that US interest rates are expected to rise another two times this year which will create an even bigger divergence in interest rates down under compared to the US which again should prove negative for the Aussie as investors flock to the higher yielding US Dollar.
Despite the above the Pound has in fact fallen lower against the Australian Dollar this week. This is down to Sterling weakness after both the Trade Secretary Liam Fox and Bank of England Governor Mark Carney highlighted the risks and increased likelihood of a no deal Brexit.
The Australian Dollar continues to find itself under pressure as uncertainty looms over the ongoing trade war stemming from the US and China. As tensions remain escalated between the two superpowers it doesn’t help the outlook for Australia’s main export which is iron ore.
If China is not trading as much with the US and the rest of the world then this has a direct negative hit on the Aussie if there is not the demand for the vital iron ore to be used for iron and steel production globally.
Trade balance data for China recorded a much lower trade surplus than expected this week so it will be interesting to see if there is a pattern emerging here. In the background the US has agreed a further 25% tariff on Chinese imports which will take effect from 23rd August. There are likely to be more developments on this trade story and any further escalations should prove negative for AUD rates if trade between China and Australia continues to look set to fall.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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