The ‘Aussie’ has had a fairly positive start to the week, with the South Pacific currency advancing on the majority of its counterparts thanks to the Reserve Bank of Australia’s (RBA) latest interest rate decision.
Previous Australian Dollar gains were recorded after the People’s Bank of China (PBOC) announced another reduction in borrowing costs. The move improved Australia’s trade prospects and bolstered demand for the domestic currency.
Last week the Australian Dollar to US Dollar currency pair moved between highs of 0.7905 and lows of 0.7746 as investors responded to comparatively dovish comments from the Federal Reserve’s Janet Yellen and a mixed lot of US data releases.
Australian data was in short supply but commodity price shifts did have an impact on the ‘Aussie’ over the five days.
The Australian Dollar began this week trading in the region of 0.7778 against the ‘Greenback.’
Although a sub-par AiG Performance of Manufacturing Index and RBA interest rate speculation limited the currency’s gains prior to the central bank’s gathering, the Reserve Bank’s decision to leave borrowing costs on hold gave the Australian Dollar a boost.
At its last meeting the RBA cut the benchmark interest rate to 2.25% in order to counter the impact of sliding commodities, weak inflation and global economic concerns. While the central bank did intimate that the threat of creating a housing bubble would likely prevent it from making further rate adjustments in the near future, many industry experts had forecast another 25 basis point cut occurring in March.
As this did not take place, the Australian Dollar broadly strengthened following the announcement and the AUD/USD pairing achieved a high of 0.7841.
Governor Glenn Stevens asserted; ‘The Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being.’
However, the ‘Aussie’s uptrend was a little limited as the RBA left the door open for future rate cuts, with Stevens stating; ‘Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target.’
Australian data also surprised, with the ANZ Roy Morgan Consumer Confidence Index showing improvement and domestic Building Approvals unexpectedly surging in January.
The 7.9% month-on-month increase defied expectations for a decline of -2.0%.
Local current account figures were also better-than-projected.
In the days ahead, further Australian Dollar movement could be caused by Australia’s AiG Performance of Service/Construction Indexes, the nation’s fourth quarter growth data, retail sales figures and trade balance numbers.
Investors with an interest in the Australian Dollar to US Dollar (AUD/USD) currency pairing will also be focusing on China’s HSBC Services/Composite PMI and the highly influential US Non-Farm Payrolls report.
A below-forecast set of jobs figures for the world’s largest economy may send the AUD/USD pairing higher before the weekend.
The Australian Dollar to US Dollar (AUD/USD) currency pair is currently trading in the region of 0.7821 – up over 0.8% on the day’s opening levels.