The Australian Dollar extended declines against its American counterpart as domestic and foreign data increased the likelihood of the Reserve Bank of Australia cutting rates.
The Australian Dollar exchange rate was trading in the region of 1.0270 against the US Dollar as of 10:16 am GMT
Poor manufacturing data for China was followed in the European session by worse-than-anticipated services and manufacturing PMI for the Eurozone, and in a risk-off market the Australian Dollar lost ground against its safe-haven currency rivals.
The South Pacific currency’s losses were compounded by domestic developments during local trade.
According to the Sydney-based Bureau of Statistics, in the first quarter of this year the trimmed mean gauge of core prices increased by 0.3 per cent, 0.2 per cent less than economists anticipated.
The consumer price index rose by 0.4 per cent in the first quarter.
As the annual rate of 2.5 per cent is in the middle of the RBA’s 2-3 per cent target, the central bank has the scope to issue an additional rate cut to spur national growth.
After the data was release the Australian Dollar fell by 0.8 per cent against its New Zealand rival and dipped against is US counterpart.
However, the currency has since experienced a modest upward correction and some industry experts expect an ‘Aussie’ rebound to occur soon.
According to one currency strategist, retail spending could be supported by the weak rise in consumer prices, thereby lessening the urgency of a rate cut.
Joseph Capurso commented: ‘What these CPI numbers would suggest is demand may not be that weak when you combine it with strong retail figures. So, I don’t think the RBA will be in a hurry to cut rates next month, and I suspect, it will take a while for it to sink in through.’
Capurso added: ‘I suspect the Aussie will push up a little higher’.
For the remainder of the week a lack of Australian economic news may limit ‘Aussie’ movement but fluctuations could occur in response to global developments.
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