The ‘Aussie’ (AUD) has shrugged off Chinese slowdown concerns today to trend bullishly against the majors, with the AUD/NZD pairing gaining ground.
While New Zealand has continued to produce increases on its August PMIs over the last week, with the domestic construction industry having returned to a state of expansion, the ‘Kiwi’ (NZD) was held back from gains by a dovish Reserve Bank of New Zealand (RBNZ).
Although Thursday’s decision to cut domestic interest rates by 0.25% had been forecast, this move was still a definite blow to the appeal of the currency in the short-term, in spite of the support it is expected to lend to the nation’s economy.
An improvement in the Australian Unemployment Rate, meanwhile, lent strength to the ‘Aussie’ (AUD) as markets began to shrug off the impact of further Chinese stock turbulence. Risk currencies were generally benefitted by a raft of disappointing data for the US, with the chances of a September Fed take-off appearing to be substantially diminished as a result. Given the degree to which the potential of an even stronger US Dollar (USD) has weighed on the South Pacific currencies, it was no surprise that the AUD/NZD conversion rate surged higher to a monthly peak of 1.1287.
This morning’s equally increased New Zealand Services PMI, which climbed from 56.6 to 58.2 in a seeming display of economic strength, was initially overshadowed by the Shanghai index plunging to its biggest daily loss in a fortnight.
Although any significant domestic data has been lacking for the ‘Aussie’ today, the antipodean currency has been making strong gains across the board during the European session, benefitting from the continued relative softness of the ‘Kiwi’ in the wake of the RBNZ rate cut. Further bets against a Fed hike on Thursday have continued to boost both commodity-correlated currencies as traders move to secure their positions ahead of the announcement.
Increased movement is likely for the AUD/NZD pairing over the coming day with the release of the Reserve Bank of Australia (RBA) meeting minutes for September and the latest GlobalDairyTrade auction. Bearishness could be in store for the ‘Kiwi’ if the value of milk solids does not manage to produce another improvement in the session, with a return to declines sure to harm the outlook of the New Zealand Dollar further.
Suitably hawkish minutes from the RBA, on the other hand, with any reassurance of policymakers remaining confident in the prospects of the domestic economy despite negative global headwinds, stand to keep the ‘Aussie’ on a bullish run against the majors. Indications of potential monetary loosening at the next meeting, however, will see a decline in demand for the Australian Dollar.
At time of writing the Australian Dollar to New Zealand Dollar (AUD/NZD) pairing is trending strongly in the region of 1.1267, while the New Zealand Dollar to Australian Dollar (NZD/AUD) exchange rate experiencing a downturn at 0.8873.
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