The Australian dollar finally joined the party of its commodity currencies. By crossing the 0.9460 high seen in April, the pair is now at its highest levels since November 2013,
Here are three reasons for this move that opens the second half of the year:
- RBA isn’t dovish: The Reserve Bank of Australia left the interest rate unchanged at 2.50% as expected and didn’t alter the statement too much. While they do see a decline in investment, they do see a strong expansion in housing construction underway. The bottom line remains the same: “prudent to have a period of stability in interest ratesâ€, and this stability is also reflected in the balanced approached. All in all, there were no new worries about the higher exchange rate, and this allows the Aussie to climb.
- Chinese PMIs: The independent HSBC Manufacturing PMI for China was confirmed in growth territory for June: 50.7 points after 50.8 in the preliminary release. This comes after many months in contraction ground (sub 50). Also the official Chinese PMI advanced from 50.8 to 51 points. China is Australia’s no. 1 trading partner and this is certainly good news.
- USD weakness: The move that began just as the quarter came to an end isn’t turning around – markets are looking to sell the greenback and clinging to every small disappointment while ignoring positive data. The miss in the Chicago PMI overshadowed the surging pending home sales.
Here is how it looks on the chart:
The round number of 0.95 looms above. This is a psychological level. For more lines, events and analysis, see the AUDUSD forecast.
