The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading up over 0.3% on the day’s opening levels ahead of the release of Markit’s US Services/Composite PMI and pending home sales figures.
The ‘Aussie’ was bolstered against several of its major counterparts by resurgence in risk appetite ahead of the Federal Open Market Committee’s interest rate decision.
An easing in geopolitical tensions, and adjustment to the fact that the price of oil is likely to remain lower for the foreseeable future, helped the Australian Dollar advance in spite of the fact that the Commonwealth Bank of Australia negatively revised its forecast for domestic interest rate increases.
The Commonwealth Bank of Australia has long envisaged that the first increase in borrowing costs would take place in February, but the institution has now adjusted this to August.
Although the Australian Dollar to US Dollar was able to advance to a high of 0.8824 during the local session, the pairing could slide later today if the US reports impress.
The nation’s Services PMI is expected to fall from 58.9 to 57.8 in October, but a surprise to the upside would support the case for a sooner-than-later Fed rate increase and would bolster the ‘Greenback’.
US Pending Home Sales are expected to show a 2.2% year-on-year increase in September, up from an annual decline of -4.1% in August.
Influential Australian data is in short supply this week, but considerable AUD/USD movement could be caused by the FOMC announcement, taking place on Wednesday evening GMT. In the opinion of a NAB representative; ‘The Fed will end QE3, but they will want to emphasise to markets and businesses that interest rate increases are not imminent. They have done this recently by saying… they expect to maintain the Fed funds rate near zero ‘for a considerable time after the asset purchase programme ends’.
The Australian Dollar to US Dollar (AUD/USD) exchange rate is currently trending in the region of 0.8813.
At the beginning of the week the Australian Dollar to Euro (AUD/EUR) exchange rate fluctuated modestly in response to the results of the European Central Bank’s extensive financial institution stress tests.
While a risk-on environment helped the Australian Dollar strengthen against the majority of its currency counterparts, the AUD/EUR exchange rate trimmed gains after it was announced that the Eurozone’s financial sector isn’t in the dire straits many had feared.
Although 25 of the banks assessed failed the test, many have since made decent strides and helped to erode the currency bloc’s shortfall. This news helped the Euro strengthen against several of its currency counterparts.
However, during the European session the Euro posted widespread declines in response to unexpectedly steep losses in three German IFO indexes.
The German IFO Business Climate gauge slid from 104.7 to 103.2 in October while the Current Assessment fell from 110.5 to 108.4 and the expectations index softened to 98.3 from 99.3.
Tomorrow Germany’s import price index could inspire AUD/EUR exchange rate movement.
The Australian Dollar to Euro (AUD/EUR) exchange rate is currently trending in the region of 0.6937.
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