AUD weaker as RBA Governor offers cautious words

Monday’s malaise has faded into a much more interesting overnight session. The Reserve Bank of Australia governor, Philip Lowe failed to elicit a positive response from traders when he spoke in the wee small hours (UK) time. His caution caused a sell-off in the Australian Dollar, which whizzed the GBPAUD rate 3/4 of a cent higher to 1.8880 or thereabouts before pausing. There were a couple of other factors that might have muted the move. The NAB business confidence indices showed a little less pessimism amongst Aussie businesses but this will come as some respite for AUD buyers who have seen little or no movement in the past few weeks.

GBP boosted by 183,000 new jobs

Sterling’s part in that GBPAUD rise comes from better than forecast UK employment data. 183,000 fresh jobs were created in the three months to July and July unemployment rate is down to 4.6% whilst average earnings rose 8.3%. There has been a lot of anecdotal evidence that the UK employment market is gaining strength on this data just supports that story. GBPUSD also rose to 1.3850 at the time of writing. That’s the week’s high. There is no more UK data today so we can probably expect the pound to pause at this point.

USD poised ahead of consumer inflation data

The morning is dominated by inflation data for various EEA states. The GBPEUR rate is still trapped between 1.17 and 1.1750. The EURUSD rate is also trapped in a narrow range between 1.1770 and 1.1850. Traders in this pair will have a lot to work on this afternoon. A torrent of minor US data also brings the consumer price index. In the last week, we have had very strong inflation data (both producer and consumer) from several countries but the forecast for US inflation is an annualised rate of 4.2%. Don’t be surprised if the actual number is higher than that. If it is, you can expect the US dollar to bounce back from the minor overnight weakness we’ve seen.

CAD unlikely to be shifted by CPI data

This afternoon also brings Canadian manufacturing sales, markets are forecasting a contraction of 1.2% in July after a very healthy 2.1% growth rate in June. It’s unlikely to shift the Canadian dollar significantly and the GBPCAD rate, which has been in a range roughly topped and tailed by 1.7560 and 1.7460 this week, is likely to remain in that neat little pattern.

AUD traders will be prepared for the overnight data tonight, which includes a consumer sentiment index and China’s industrial production data. That influences the AUD due to the volume of raw materials that Chinese factories import from Australia. We will also see UK inflation data at the crack of dawn tomorrow. So be ready.

Have a great Tuesday.

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