On Wednesday, the 6th of January, the Australian dollar had plunged against a basket of currencies including seven major currencies as well, as the country’s central bank had been considering the option of a plausible interest rate cut in the wake of growing economic risk.
The RBA’s (Reserve Bank of Australia) decision of interest rate cut was expected more or less, as the country’s Chinese import depended economy had been scaled down, shifted to a muffled momentum following growing grudge of a global-scale economic slowdown.
Nonetheless, while the Aussies had been sinking, the American Dollar seemed steadied and had been slowly gathering pace following Trump’s Tuesday’s addressing to the nation. According to the Governor of Reserve Bank of Australia, Philip Lowe, the rate could shift either way, depending on the labor market condition and inflation stance.
Nevertheless, given the status of Chinese economy, battered by a stack of dismantling factory data, the Chinese import dependent Australian economy would likely to shrink eventually, echoing the lead of China, Germany, Italy and UK.
Meanwhile, the US Fed’s pause on the three-year long rate hike cycle had also been an indication of slowing US economy. However, following the controversial & downcast comments from RBA governor, the Aussies were rammed hard in the early Asia Pacific trading session, while in the intra-day trading, the Australian Dollar (AUD) lost 1.62 percent against the US dollar to $0.7116, posting its biggest intraday lose since November 9th, 2016.
Concomitantly, the AUD/EUR pair was down 1.32 percent to 1.5966, and the Great Britain Pound had surged 1.62 percent to 1.8185 against Australian, posting its biggest intra-day gain since April 18th, 2017. While the Aussies had been found foundering below its critical support levels, the American dollar had gathered pace, rising over 0.43 percent against Euro to 1.1363 and 0.01 percent against safe-haven Japanese Yen to 109.97 Yen.
Addressing to a more dovish than expected voice from RBA, a senior currency trader at Silicon Valley Bank in Santa Clara, CA, said, “The Aussie is definitely where the action is today. The language was a bit more dovish than expected. ”