In the aftermath of the Reserve Bank of Australia’s less dovish rate decision/policy statement the ‘Aussie’ posted widespread gains, advancing on the majority of its currency counterparts and surging by the most for eight months against the US Dollar.
The Australian Dollar received additional support overnight as the AiG performance of services index for Australia edged closer to expansion territory.
The non-manufacturing measure climbed from 46.1 in December to 49.3 in January, just shy of the 50 mark separating growth from contraction and the best reading since March last year.
However, the Australian Dollar went on to trim gains ahead of the publication of the RBA’s quarterly policy statement.
The ‘Aussie’ remained close to a two-month high against the ‘Kiwi’ but edged lower against the ‘Greenback’ as domestic bonds fell before the report was released.
According to one Singapore-based industry expert; ‘The statement on monetary policy is likely to see the RBA upgrade its assessment on inflation and that should provide some underpinning support for the Aussie. Yesterday’s statement made it very clear that they have shifted to a neutral bias and rates will remain where they are for some time.’
The Australian Dollar began the European session in a stronger position against the Pound and was able to extend gains after a measure of the UK’s services industry failed to reach estimates.
The UK services PMI edged from 58.8 in December to 58.3 in January.
Although the report showed that business confidence was at its highest level since the spring of 2010, the pace of new business grow was at its slowest for eight months.
While yesterday’s UK construction output data surpassed expectations, the services and manufacturing sectors contribute the most to national GDP so the fact that they are showing reduced growth supports the case for the Bank of England holding interest rates at record lows and piles pressure on the Pound.
Overnight the GBP/AUD pairing could fluctuate as a result of Australian trade balance, retail sales and business confidence data.
Of course, tomorrow’s BoE rate decision will also influence the direction taken by the pairing towards the end of the week.
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, 0.8930,
Australian Dollar,,Euro, 0.6608,
Australian Dollar,,Pound, 0.5484,
Australian Dollar,,New Zealand Dollar, 1.0860,
US Dollar,,Australian Dollar, 1.1198,
Euro,,Australian Dollar, 1.5135,
Pound Sterling,,Australian Dollar, 1.8227,
New Zealand Dollar,,Australian Dollar, 0.9226,
[/table]
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