Central banks can be big movers in currency fluctuations and exchange rates. The Australian dollar has plummeted overnight, falling about 1.5% as a result of its central bank’s surprising decision to cut the benchmark interest rate to a record low. Reserve Bank of Australia Governor Glenn Stevens expects the cuts to kickstart an industry revival.
The US dollar has reached its lowest level in almost a year, and analysts are now predicting the chance of a June rate hike by the Federal Reserve to be at a mere 12%, compared to 21% on April 27. However, if today’s auto sales data recovers from last month’s slump, there is reason to think that things are well with the American consumer.
One currency’s decline is another’s boon: the euro is benefiting from dollar weakness and has advanced almost 7% this year against the USD, enjoying its longest run of gains since 2013. Could this mean the Eurozone economy is improving? Yesterday’s report that European manufacturing is expanding at a faster clip than thought previously is raising hopes. In contrast, the British pound traded lower against other major currencies this morning after today’s Markit Manufacturing PMI data showed that manufacturing has fallen below expectations.
EURUSD: Euro is up on subdued expectations for a Fed rate hike and disappointing US data.
GBPUSD: The pound is down on lower than expected manufacturing data.
AUDUSD: Aussie dollar plummets on the heels of central bank decision.
USDCAD: Canadian dollar maintains its stride on soft US data.