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August 3, 2017

Australian Dollar extends slide after RBA, fueled by weak trade surplus

Australian Dollar extends slide after RBA, fueled by weak trade surplus

Australian dollar traded in red during the Asian session on Thursday, as the country’s trade surplus missed estimates, Caixin said its China service activity index fell while investors are bracing for a latest update on US jobs market that will appear on Friday.
AUDUSD was trading at 0.7933, falling 0.43%, while USDJPY were roughly balanced at session opening at 110.71. GBPUSD was trading at 1.3218 holding steady ahead of the BoE decision
Dollar futures, a gauge of strength of US currency relative to a trade-weighted basket of the six leading currencies, rose by 0.09% to 92.83.

In Australia, the surplus of the trade balance fell to AU$ 856 million, which is significantly lower than the expected AU$1.8 billion. In China, the index of business activity in services from Caixin fell from 51.6 to 51.5, although it was expected that it would rise to 51.9.
Yesterday, the dollar fell in price relative to the basket of other major currencies, after the increase in the number of employed in the private sector was less than forecast, playing down expectations on official employment figures from labor Department that will appear on Friday.
ADP and Moody’s Analytics said that the number of employed in the private sector rose by 178K last month lagging behind an estimate of 185K.
This report affected expectations about official employment data, which will be published on Friday, indicating a possible slowdown in the US labor market. This, in turn, reinforced expectations that the US Federal Reserve would abandon its plans to once again raise interest rates this year.

Nevertheless, the president of the Federal Reserve Bank of Cleveland, Loretta Mester, said that the central bank can maintain its gradual approach to tightening monetary policy, since it will allow to prolong the period of economic growth.
“I see the benefit of consistency: it reduces the level of uncertainty and underscores the fact that we are systematically formulating monetary policy, aiming for the medium term, the risks associated with it and the consequences of our goals,” Mester said.
The weakening of the US dollar caused the pound to rise before today’s meeting of the Bank of England on monetary policy. The Bank of England is unlikely to raise interest rates, but traders will carefully study the minutes of its meeting and the statement of Chairman Mark Carney in search of hints of future changes in monetary policy.

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