The risk-averse theme continued this week following the Federal Reserve's recent comments on interest rates and inflation.
A decline in new home sales in the US has again dampened demand for risk-sensitive currencies as investors flock to the safe-haven USD. It has been a quiet week for economic data in Australia which saw the AUD slump against the major currencies. The week ahead looks similar and, with no key releases, it is likely we will see the AUD print further losses in lieu of positive economic data.
AUD to NZD
The AUD has fallen to the lowest level against the NZD in three weeks following a lack of news out of Australia. The AUD, which has already fallen as much as 3% against other currencies, has been range-bound against the NZD for the last two weeks given that there has been no clear direction to drive either side.
The move lower could be stimulated by the RBA’s stubborn view on interest rates which have hit the headlines again this week, and comparatively the RBNZ is much more bullish on raising the base rate in New Zealand.
AUD to USD
As the RBA is in no rush to change gears and is waiting for its 2-3% inflation target before adjusting interest rates, the markets are concerned that Australia could get left behind, with other central banks much more vocal about their changing monetary policy.
Over the next 24 hours, GDP figures and unemployment claims from the US will be released, and strong results here are likely to push the AUD down further into the weekend.
AUD to GBP
Despite concerns of the Delta variant of Covid-19 spreading through the UK, the GBP has been performing well, pushing the AUD to the lowest level since May last year. UK jobless claims fell in April and the return of the nation’s hospitality sector has given investors further confidence in an economic recovery.
The Bank of England will soon be meeting to decide on interest rates and its asset purchasing programme, and although no change is expected, bullish commentary will provide further support to the GBP.
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