Weekly Analysis - Aussie falls as sentiment remains low

   on February 08 2013 11:08 AM

Aussie falls as sentiment remains low

Unexpected economic numbers caused wild swings in most of the major currencies during the week. Key statements also added to the volatility. 

The highlights of the week included a surprise punch by the UK that interest rate talks are in consideration, although interest rates remained unchanged for both the UK and Europe, and better than expected sentiment figures from Canada.

Despite the activity in the eurozone and some interesting events in North America, Australia is grabbing most of the attention as sentiment turned negative and remained so for the entire week.

The AUD/USD pair began trading at 1.0416 before Mondays building approval number showed a moderate decrease in housing sector activity for the previous month. The expected figure was due out at 1.1% growth but actually came out at way below this expectation at -4.4%.

This data didn’t invoke much of a reaction from the markets as the price consolidated for most of the first day’s trading, reaching a weekly high point of 1.0456 before Tuesdays Asian session kicked off.

Australian interest rates held

The open of trading on Tuesday saw the anticipated trade balance figures come out surprisingly positive at -0.43B, as opposed to the expected -0.81B that most traders were expecting. This optimism was short lived, however, and the Aussie did not have a chance to rally because shortly after, the RBA announced that it was holding its interest rates at 3%.

It was the statement that followed this decision that set the tone for the week to come. The central bank’s board stated that they are fully prepared to cut the rate as early as this year, should the current economic climate continue on its current course. This caused a sharp drop in the price from the weeks high all the way down to a low of 1.0368 and the close of the session saw only a minor recovery back up to 1.0400.

Wednesday opened with worse than expected retail sales numbers of -0.2% which was 0.5% worse than the 0.3% expected number. This caused the sell off to continue with the price hitting 1.0295 by the close of the day.

Thursday’s trading began with positive employment numbers, showing a slight decrease in the unemployment rate to 5.4%, down from 5.5%.. This caused a slight rally back up to 1.0336 before the price once again collapsed through the 1.0300 level hitting a low of 1.0272.

Temporary halt

A slight overnight rally that took place over night could mean that the AUS/USD has entered into a short consolidation phase, with the price trading around the 1.0313. Australian sentiment is expected to remain weak, however, and the fall in Aussie strength may continue on into the next month.

On Tuesday 19, the Australian Monetary policy meeting minutes are released that could give indications as to the intentions of the Australian government.

 

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