The Australian Dollar to US Dollar (AUD/USD) exchange rate climbed by over 0.4% on Monday as investors responded to the news that China, Australia’s largest trading partner, introduced additional stimulus measures.
It is expected that the People’s Bank of China will bolster lending among regional providers by as much as 200 billion Yuan. The news that the central bank is making efforts to support the world’s second largest economy gave commodity-driven currencies like the Australian Dollar a boost.
The AUD exchange rate was little-changed in the wake of remarks issued by the Reserve Bank of Australia’s Assistant Governor.
Christopher Kent insinuated that the Australian population will have to accept a retirement age of 70 if the local economy is to thrive.
Other factors also contributed to the AUD/USD gains and with investors paring back their Federal Reserve interest rate hike expectations, the US Dollar was trending in a weakened position against most of its currency counterparts at the start of the week.
As highlighted by industry expert Richard Cochinos; ‘You’re getting to this point where accounts and market environments are getting confused by conflicting statements. The desire to lighten a position is stronger than the desire to add to risk.’
Although the ‘Aussie’ was supported by news from China, UK house price and confidence figures ensured that the Pound didn’t lose too much ground against the Australian Dollar (GBP/AUD) at the beginning of the week. Sterling was holding steady against the Australian Dollar but managed to advance on the Euro (GBP/EUR) and US Dollar (GBP/USD).
In the view of currency strategist Jeremy Stretch the Pound ‘Is seeing a short-term resurgence. It’s a slightly more positive risk environment and I guess the underlying theme is still going to be data-driven’.
The AUD/GBP exchange rate could experience volatility during the Australasian session as the minutes from the latest Reserve Bank of Australia meeting are published.
A particularly dovish set of minutes or excessive jawboning of the Australian Dollar could help Sterling strengthen against its South Pacific peer.
Tomorrow’s UK public finance figures may also impact the AUD/GBP exchange rate.
With domestic reports all indicating that the Eurozone’s largest economy is on the verge of recession, the Euro has been feeling the pressure of late.
The common currency edged lower still against several of its peers on Monday as Germany’s Producer Price Index registered month-on-month stagnation and annual contraction of -1.0%.
The over 0.3% gain in the Australian Dollar to Euro (AUD/EUR) exchange rate was also aided by a narrowing in the Eurozone’s current account surplus.
While the RBA meeting minutes will be of interest to investors, overnight data releases (including China’s GDP, industrial production and retail sales figures) could all have an impact on the direction taken by the AUD/EUR exchange rate on Tuesday.
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