The Australian Dollar continued trading in the region of a 6-year low against the US Dollar on Tuesday as policy meeting minutes released by the Reserve Bank of Australia (RBA) indicated that more interest cuts are on the horizon.
Early in the session, the ‘Aussie’ came under pressure and slipped to trade in the region of 76 cents to the US Dollar due to the latest Reserve Bank of Australia minutes suggesting that more interest rate cuts will occur.
According to the minutes, the bank believes that it is appropriate to hold the cash rate steady for the time being.
‘History shows that the bank uses this language just prior to changing the cash rate. Over the past six years, they have used the phrase ‘time being’ five times, and in each case the bank has moved the cash rate the following month,’ said an economist from ANZ.
Weak iron ore prices and focus on Wednesday’s Federal Reserve policy meeting also put pressure on the Australian currency.
As the session progressed, mixed economic data out of the USA initially softened the ‘Greenback’ but it soon recovered as market attention shifted to Wednesday’s Federal Reserve policy meeting.
According to the Washington based Commerce Department, the number of new building projects begun in February fell to the lowest level in a year as harsh winter weather prevented construction crew from embarking on new builds. The report is just one of a string of releases, which suggest that the world’s largest economy suffered a soft patch at the start of the year.
The number of new builds tumbled by 17% to a seasonally adjusted annual pace of 897,000 units, the lowest number recorded since the first month of 2014. Compared to February last year the number of builds was down by 3.3%.
The data had little lasting effect on the US Dollar as separate building permits data showed that the number of permits issued rose to a seasonally adjusted annual rate of 1,092,000 in February, a rise of 3% on the preceding month. The positive figure suggests that the weakness of the new builds figure will only be temporary and that numbers of builds will rally strongly over the spring and summer months.
The US Dollar could surge higher against the ‘Aussie’ on Wednesday if the Federal Reserve shows signs that it will hike interest rates in the summer.