An unexpectedly strong surge in domestic employment boosted the ‘Aussie’ earlier this week and saw the commodity driven asset post notable gains against peers like the Pound.
However, the Australian Dollar went on to pare its advance against rivals like the ‘Greenback’ after risk-aversion seeped back into the market ahead of the Crimean referendum.
The vote will decide whether the Crimea region should detach itself from Ukraine and rejoin Russia. A potentially violent reaction could follow the decision, whatever the outcome of the vote, and investors are turning to safe-haven assets as a consequence.
Yesterday the US Secretary of State, John Kerry, said of the current situation; ‘If there is no sign of any capacity to be able to move forward and resolve this issue, there will be a very serious series of steps on Monday in Europe and here with respect to the options that are available to us.’
The Australian Dollar also came under pressure as Goldman Sachs cited weak domestic demand and the continuing threat of an RBA interest rate cut as the reasons behind it lowering its 12 month forecast for the ‘Aussie’.
Goldman Sachs cut its 12 month forecast from 80 US cents.
They stated; ‘Our bearish Australian Dollar forecast is underpinned by expectations that US data weakness is transitory, headwinds to Australian growth are intensifying, the next phase in the decline in the terms of trade has commenced and capital flows are turning less supporting. Geopolitical risks and ongoing concerns over the impact of tightening Chinese financial conditions together risk a more immediate downward adjustment in the Australian Dollar.’
After Goldman Sachs released its projections the Australian Dollar softened against its US counterpart.
The ‘Aussie’ was also weaker against the Euro but managed to hold its own against the Pound ahead of the release of UK trade balance data.
UK trade balance figures fell short of estimates, but UK construction output growth surpassed expectations so some GBP/AUD fluctuations may occur in the hours ahead.
As Australian data is thin on the ground, next week movement in the GBP/AUD pairing will largely be inspired by UK news, including Wednesday’s employment figures and the publication of minutes from the Bank of England’s latest policy meeting.
Ukraine developments may also be responsible for ‘Aussie’ movement.
Australian Dollar (AUD) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Australian Dollar,
,US Dollar, 0.9026,
Australian Dollar,,Euro, 0.6500,
Australian Dollar,,Pound, 0.5429,
Australian Dollar,,New Zealand Dollar, 1.0558,
US Dollar,,Australian Dollar, 1.1091,
Euro,,Australian Dollar, 1.5374,
Pound Sterling,,Australian Dollar, 1.8422,
New Zealand Dollar,,Australian Dollar, 0.9477,
[/table]
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