According to my namesake, Greg
McKenna, writing in Business
Insider Australia, the governor of the Reserve Bank of Australia (RBA) Glenn
Stevens, has made an explicit link between sub-par Aussie growth, related to
rapidly falling commodity prices, among other things, and what the central bank
perceives to be a significantly overvalued Australian dollar.
In a speech in Tasmania overnight in
GMT terms, the governor said “…investors
are under-estimating the likelihood of a significant fall in the Australian
dollar at some point”. He also said that the RBA had “ammunition”
on interest rates. This was interpreted by traders as indicating that the next
move on rates would be down, and could take place as early as December of this
year.
The Aussie fell significantly against
both the US dollar and the New Zealand dollar in the wake of the governor’s
comments. From the technical point of view, it is now approaching the 200
period Exponential Moving Average (EMA) on the AUDUSD four hour chart (above).
A break through this will set the scene for a further fall.
UK
economy keeps on giving
In the opposite direction, the Pound
Sterling continues its steady rise against all major counterparts. The outcome
of the UK Purchasing Managers’ Index for construction, yesterday, which showed
an increase in June, added to the impetus.
The Bank of England Monetary Policy
Committee is now expected to raise core interest rates this coming November. As
interest rate differentials are of abiding interest to the Carry Trade, the
members of which attempt to effectively borrow in low interest rate
jurisdictions and lend out in high rate ones, thereby driving up the currency that
has a high rate and lowering those with depressed rates, the potential upcoming
moves in Britain and Australia would make the GBPAUD currency cross one to
watch in the coming months.
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