Currency Market Review: Australian Dollar on the Rise
Summary:
- The Australian Dollar has continued its previous growth after recent Chinese economic data showed stronger than expected performance.
- The Great British Pound is struggling due to Brexit uncertainty.
- Expected interest rate cuts are weakening the Euro and U.S. Dollar.
Australian Dollar vs. Pound Sterling
The Australian dollar is on the rise. The Reserve Bank of Australia cut interest rates to record lows and maintains a forecast for future cuts. Moreover, recent economic data from China has been stronger-than-expected prompting analysts to expect increased spending in Australia. China’s industrial output increased from a 17-year low and retail sales increased by almost 10% from the past year. Since China is Australia’s biggest export market, positive Chinese economic data buoyed the Australian dollar. Ryan Felsman, economist for the Commonwealth Bank of Australia explains that “the upside from an Australian perspective is that China – our biggest trading partner – will continue to stimulate its economy to achieve its official annual growth target.”
On the other hand, the British Stirling is falling. Boris Johnson is set to become the new prime minister of the United Kingdom, increasing chances of the United Kingdom leaving the European Union. Westpac strategist Sean Callow states, “The unemployment rate of 3.8% is the lowest in 45 years, wage growth has picked up from below 2% to well above 3% over the past 2 years, and inflation is at the BoE’s 2% target”. Uncertainty over Brexit, however, has preveented the BoE from increasing interest rates since August 2018. Boris Johnson’s presence as the new prime minister has increased fears of Brexit taking place, caused the pound to decline because financial markets have lost hope of an interest rate increase from the Bank of England in the near future.
Thus, due to both a appreciation of the Australian Dollar and a depreciation of the Sterling Pound, AUD/GBP rose 1.13% over the past week, in line with I Know First’s bullish outlook.
Australian Dollar vs. Euro
The Australian Dollar has appreciated against the Euro for the same reasons that it the Australian Dollar is on the rise against the Pound.
On the other hand, the Euro has depreciated. European Inflation may have risen year-on-year from 1.2% to 1.3% and monthly figures improved by 0.2%, but these values fell well below the European Central Bank’s target inflation rate of 2%. Marion Amiot, economist at S&P Global Ratings states, “the global slowdown [could] exacerbate the persistent weak inflationary pressures, which could cause inflation expectations and the ECB’s target to diverge further.” As a result, increased expectation of the European Central Bank cutting interest rates forced the currency towards monthly lows.
Overall, AUD/EUR rose over the seven day period of the forecast by 1.26%. I Know First was correct in forecasting a positive future for the currency pair.
Australian Dollar vs U.S. Dollar
While the Australian Dollar is on the rise, the U.S. Dollar is weakening. Expectations that the Federal Reserve might cut its interest rate by more than 25 basis points at the end of July are contributing to the weakening dollar. Further, the likelihood of the Federal Reserve weakening the dollar has increased after Treasury Secretary Steven Mnuchin said,”This is something we could consider in the future but as of now there’s no change to the dollar policy.” Moreover, U.S. President Donald Trump wants a weaker U.S. Dollar and has asked aides to find a way to “make it happen.”
Over the past seven days, from July 12th, 2019 to July 20th, AUD/USD grew by 0.99%. Thus, I Know First correctly selected AUD/USD as a currency pair with a bullish future.
I Know First Currencies Forecast
This bullish currencies forecast was sent to the current I Know First subscribers on July 12th, 2019
Algorithmic traders utilize these daily forecasts by the I Know First market prediction system as a tool to enhance portfolio performance, verify their own analysis and act on market opportunities faster. This forecast was sent to current I Know First subscribers.
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