The Australian Dollar is a very interesting currency to watch for speculators and investors. It is on a long term down trend against the US Dollar and the volatility is usually high. Based on its current price movement, Ausie might close in negative territory for the third consecutive week.
The most interesting part about Ausie is that its moves can be easily forecasted if one would look over its economic data or economic releases. Australia this week reported a rise in the Building Approvals and better than expected Current Account. These releases brought some enthusiasm in the market, but it did not stay for too much. On Wednesday the Australian GDP was released. The economy seems to have gained 0.3%, but it was less than half of what the market was expecting. And maybe the most interesting thing is that RBA kept its benchmark rate unchanged, at 2.50%, but WESTPAC is expecting two cuts at the beginning of next year.
Australia has now a slowing economy, its Central Bank governor sustains that the Aussie is over evaluated and WESTPAC comes now with rate cut expectations. We can conclude after all of this that the AUD will continue its down trend on short and, most probably, medium term.
Yesterday the ECB president Mario Draghi did what he is good at once again and created a massive volatility tsunami. The ECB president, held the press conference after the monetary policy of the European Central Bank, talking about its 2015 plans. From his sayings the European Union’s economy doesn’t seem to improve. Its current expectations are for the investments to reach 0.7% in 2014 (vs. 1.1% past forecast), for the unemployment rate to end 2014 at 11.6% and 2015 at 11.2%. One of their most interesting forecast is for the EURUSD which they expect to end 2014 around 1.33. But it was his comments that the Governing Council decided to reassess the success of its existing stimulus programs in early 2015 along with the impact of weak oil prices on the Eurozone economy which pushed EURO higher.
Economic data couldn’t sustain Euro’s appreciation, but still yesterday’s close was above 1.2360 after the initial move was actually down. The spike was triggered when Draghi mentioned bond buying at the start of the press conference. But he was just reminding about the decision, to buy covered bonds, that was already announced in September. Because the statement lacked any kind of clear commitment to QE, the Euro rallied all the way to 1.2456. Although there was not much action indicated from Mr. Draghi’s speech, investors perceived his speech more dovish, hence as a relative bullish sentiment for the European single currency.
Thursday Euro was the star in the Forex Market. Today the US Dollar could take over this seat. Wednesday, the ADP Non-Farm Employment Change was released at 208K, lower than analysts forecasted and yesterday the Unemployment Claims were in line with expectations. Today the Non-Farm Employment Change is expected to show 231 thousand new jobs added in the private sector and an unemployment rate of 5.8%.
