Policy Switch Undermines AUD

Daily Forex Fundamentals | Written by Investica | Aug 05 08 10:46 GMT |

There is scope for a limited technical Australian dollar recovery, but rallies will quickly attract selling pressure.

The Australian dollar regained some ground in European trading on Monday, but failed to regain the 0.9350 level against the US dollar and dipped back towards 0.93 in New York trading.

The Australian data remained weak with the services PMI index weakening further to 42.8 in July from 45.6 the previous month, reinforcing fears over the economic trends after a strong of weaker releases surrounding the housing sector.

As expected, the Reserve Bank left interest rates on hold at 7.25% following the latest policy meeting, but the bank statement suggested that it would be looking to cut rates within the next few months.

The switch to an easing bias will reinforce negative Australian dollar sentiment in the short term and selling pressure will be fuelled by further losses in commodity prices. Gold prices dipped further below the US$900 per ounce level on Tuesday with industrials unsettled by fears over weaker demand and there was an Australian dollar dip to 0.92 in Europe

Investica
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