Author : Brett Gordon
As mentioned yesterday the AUD initially tried to rally during the trading session on Tuesday but as we entered into a bit of a “risk off” situation, the Australian dollar got sold in favour of owning safety currency such as the US dollar and the Japanese yen.
Add to that ,the closely watched National Australia Bank (NAB) business confidence survey fell 3 points to +1 in August from July’s print of +4, the business conditions index also deteriorated falling 2 points to +1 vs +2 in the previous month. The NAB data signals rate cuts have failed to improve business sentiment and may increase pressure on the Reserve Bank of Australia for further easing. The AUD dipped on the announcement and has pared back losses overnight.
All eyes will be on the European Central Bank rate announcement tomorrow night, with expectations the ECB will cut interest rates and point to further quantitative easing. The Euro rose overnight on reports that Germany is considering ramping up fiscal stimulus, an attempt to ward off a recession in Europe’s biggest economy. This should reduce pressure on the ECB to act aggressively to boost growth and provide support for the Euro.
New British Prime Minister Boris Johnson has promised to secure a better deal with the European Union at the October 17 summit in Brussels, following parliament voting against a snap election yesterday. PM Johnson however succeeded in suspending Parliament until October 14. The pound remains vulnerable to Brexit developments with markets seeing an increased risk of the UK crashing out of the EU next month.
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