The Australian Dollar (Currency:AUD) continues to find itself under significant pressure across the FX markets today:
- The Pound to Australian Dollar exchange rate is 0.7 pct higher on a day-to-day basis at 1.7395.
- The Euro to Australian Dollar exchange rate is 0.3 pct higher at 1.4840.
- The Australian Dollar to US Dollar exchange rate is 0.62 pct in the red at 0.9014.
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Both the Aus Dollar and the New Zealand Dollar came under more pressure in Asia session trade with the former testing support at 0.9000 and the latter dropping through the 0.7900 figure before rebounding slightly in during European dealing.
There was little in the way of news from the Asia Pacific region with the downdraft in AUD/USD and NZD/USD driven more by momentum rather than any fresh fundamental factors.
The GBPAUD rate continues to move higher
FX analyst Sasha Nugent at Caxton FX says she is forecasting the British Pound to advance yet further:
"The aussie continues to struggle against the pound for yet another day. The currency weakness is still feeling the brunt after yesterday’s release of RBA minutes didn’t rule out further rate cuts. In addition, the uncertainty regarding the Fed’s next policy decision has also weighed on AUD.
"The GBPAUD rate is now at the highest level seen in over a month with the rate now at 1.7373. We don’t see this trend easing up anytime soon and consequently expect the rate to continue to rise further, aiming to close around 1.74.
Losses against the US dollar to be capped?
Ahead of today's big FOMC event, we hear from Sean Lee at FXWW who says he is confident Aus Dollar losses will be capped, particularly against the US Dollar:
I remain long of AUD/USD with a stop below .8950 as I feel we will get extended range trading between .90/.93 ahead of the general election. The present risk environment is obviously against this trade but excessive short-positioning and the risk-reward ratio are both in my favour.
Australian currency pressured by central bank
At the heart of Australian dollar losses is the Reserve Bank of Australia.
Kathy Lien at BK Asset Management says:
"According to the RBA minutes, the central bank is still open the idea of additional easing but they are in no rush to reduce rates.
"A "run of generally weak economic data," soft consumer spending and the view that "China was unlikely to pick up much, if at all, in the coming quarters," prompted the downgrade in GDP forecasts and the rate cut. However the outlook is unclear because the central bank ended the minutes by saying the Board "neither close off the possibility of reducing rates further, nor signal an imminent intention to reduce rates further".
"As a result, the main takeaway is that the central bank still maintains a bias to ease. The Westpac leading index is scheduled for release this evening and we do not anticipate any significant improvements."