The pound retreated on Thursday after the Bank of England (BoE) struck a more cautious tone than expected following its latest policy meeting.
However, the Reserve Bank of Australia (RBA) threw a lifeline for the Australian Dollar following the release of the bank’s latest meeting minutes. These revealed that the bank was notably less dovish than many analysts had predicted.
The minutes showed: ‘Members reaffirmed that there was no need to adjust the package of measures in Australia in the current environment.
‘Members agreed, however, to continue to assess the evolving situation in Australia and did not rule out adjusting the current package if circumstances warranted.’
In Australian economic data, Wednesday saw the release of the latest Australian Westpac leading index for July, which fell from 0.5% to 0.05%. As a result, this sparked concerns for Australia’s struggling economy.
Meanwhile, Thursday saw the publication of Australia’s flash manufacturing PMI for August, which revealed activity slowed closer to stagnation.
At the same time, the services PMI showed growth slipped into contraction territory, which weighed on AUD exchange rates.
Gareth Aird, the head of Australian economics at the Commonwealth Bank, was upbeat in his assessment, saying: ‘Encouragingly, firms collectively retain an optimistic view on the outlook despite the setback in Victoria.
Ongoing fiscal support for households and businesses remains critical to ensuring that optimism is not misplaced.’
Looking ahead, the Australian dollar could continue to benefit from signs that the US-China trade deal is moving ahead. As a result, we could see the risk-sensitive ‘Aussie’ continue to climb as the world’s two largest economies show promising steps towards securing a trade deal.
Furthermore, with optimism growing over possible treatments and vaccines for the coronavirus, we could likely see the risk-sensitive Australian dollar edge higher against its peers.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)