AUD volatile as RBA base rate on hold but bond buying slows

As expected, the Reserve Bank of Australia gets their base rate at 0.1% and forecast that it will remain at this record low until 2024. However, they did scale back their bond-buying programme from AUD 5 million worth of bonds per week down to AUD 4 million. There was a lot of talk in their statement about how the delta variant had delayed the economic recovery in Australia. All of this led to a very volatile overnight session for the Australian dollar. The GBPAUD rate drops to AUD 1.8550 and bounced to AUD 1.8650 as traders tried to assess the impact. This pair starts Tuesday a little below that high, at AUD 1.8625.

Chinese trade picks up

We also had data confirming a sharp rise in Chinese international trade in August. Exports rose 25.6% from a year earlier and imports grew 33.1%. These numbers are very good news for the countries that supply China. Australia is amongst those how long with New Zealand Japan to many other Asian nations full stop. Market forecasters had expected the numbers to be more subdued due to delays in ports and also to the sky-high cost of shipping.

This data allowed the GBPNZD rate to drop back after the Pound had pushed up to NZD 1.9445. This pair starts the data half a cent lower than that spike. That is despite a surprisingly strong UK house price index from Halifax. A 0.7% rise in August was above expectations. I guess, with the cost of building materials more than doubling in some instances, the prices of existing homes have to reflect the increasing cost of new builds.

This morning’s better than expected German industrial production figure has added a little strength to the euro. The EURUSD exchange rate pushed above $1.1875 in early trade and we have yet to see the eurozone economic growth data, which will be released this morning. Forecasts centre around 2% growth in the quarter and that should bring the annualised growth to 13.6%. Anything greater than that will give the euro further impetus. The opposite is also true, poor numbers we’ll see the euro give back its early gains. The GBPEUR exchange rate remains in a vice-like grip held by €1.1650 and doesn’t seem to have any catalyst that will shift that.

EU GDP awaited

The US data diary today appears to have no entries other than tumbleweed. So the US dollar is likely to trade in fairly narrow ranges unless driven by the EU data this morning. The US dollar is still likely to remain strong ahead of the US Federal Reserve’s meeting on the 22nd of September. Many had believed the Fed would begin a programme of monetary policy tightening through a reduction of bond buying at that meeting. However, the hopes of that move are fading as the ongoing battle with covid and the sluggish recovery around the globe hamper US economic growth. For now, GBPUSD is moving in a fairly tight range between $1.38 and $1.3850.

And I’ll leave you with this comment from author, Meg Rosoff. “Every day a piano doesn’t fall on my head is good luck”. Now that’s a motto to live your life by.

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