Aussie dollar powers higher but outlook remains compromised by looming RBA decision
The Australian dollar (Currency:AUD) has joined fellow commodity currencies and enjoyed a relief rally on Monday morning:
The pound sterling to Australian dollar is 0.87 pct lower than seen at Friday's closing level at 1.6551.
The euro to Australian dollar exchange rate is 0.74 pct lower at 1.4334.
The Australian dollar to US dollar is 0.62 pct up at 0.9106.
The Aussie dollar versus New Zealand dollar is 0.16 pct higher at 1.1659.
NB: It is important to note that the above spot rates are subject to the imposition of a discretionary spread by your bank. However, an independent FX provider guarantees to undercut your bank's offer, thus delivering more currency. Please find out more.
Behind the moves higher in the Australia currency was news that Chinese economic growth in Q2 came in at 7.5 pct.
"The main beneficiary of the news was the AUD, up 0.63% against the USD on the day at the time of writing. The Aussie dollar moved to the lowest level since mid-2010 last week as fears over China and the slips in worldwide commodity markets gave investors in Australian mining operations cause for concern," says Jeremy Cook at WorldFirst.
Aussie dollar will be sold on rallies
Vincent Pellizzari at RTFX Ltd says that today's AUD rally is liable to invite selling pressure:
"The Aussie and Kiwi are both trading higher following the Chinese GDP release in line with the consensus for Q2 with a growth of 7.5 pct p.a.
"AUD/USD posted a daily high of 0.9122 but remains a sell on rallies as prospects for Reserve Bank of Australia to lower interest rates to a record low of 2.5 pct from 2.75 pct are high."
Last week we reported that expectations for an interest rate rise at the RBA have increased, particularly following poor unemployment figures released last week.
"The labor markets in Australia are clearly signalling that the economic boom, led by the massive demand for resources from China is over and growth is likely to be markedly weaker in the foreseeable future," says Boris Schlossberg at BK Asset Management, "investors therefore are worried that the RBA will continue to lower rates to spur demand and drive the AUD/USD exchange rate lower.
Outlook for the Australian dollar this week
In Australia this week, the July Minutes from the RBA Board meeting will be of interest, especially given that chances of an August rate cut appear to have risen recently.
"While we expect the RBA to ease policy further, picking the timing of the next move remains complicated due to the (unknown) timing of the upcoming federal election and as the Bank may want to gauge the effects of the lower AUD," ANZ Bank tell their clients in a morning briefing.
The NAB quarterly business survey will be released on Thursday and will provide important updates on firms’ capital expenditure intentions; analysts will also watch the ‘labour as a constraint on output’ measure closely as this is a good measure of spare capacity in the labour market.
In the United States, Fed Chairman Bernanke will deliver his July semi-annual testimony to congress on Wednesday night, although ANZ expect little new information beyond that already communicated by Bernanke in recent speeches.