Australian dollar back towards 2 year low

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Jun 20, 2016
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The Australian dollar has failed to capitalize today after a solid round of economic data which points to ominous signs for the currency as the year closes out.

Data out yesterday showed GDP figures in Australia currently sitting at 3.4 percent which were well above analysts’ expectations for a figure of 2.8 percent.

Shortly after the news was released the Aussie dollar bounced off a 2 year low back up through the US72c mark before giving up most of the gains as investors focused back on the main recent events that have been driving the Aussie dollar which is more global.

Events such as the trade wars between China and the US as well as Brexit among other things have been putting immense pressure on emerging markets and in particular the Australian dollar which is itself part of this group.

Although the Aussie dollar remained flat after the latest round of GDP figures, some say that the positive figures may eventually feed in to higher inflation which will force the Reserve bank of Australia to lift interest rates sooner or later.

"The RBA had stuck to its view that a rate hike was a long way off yet, despite the fact that the economy is moving in the right direction, as today’s data confirms. That makes it clear that AUD strength will arrive later than we had envisaged, but it will arrive. said Esther Maria Reichelt, an analyst at Commerzbank.

“The longer the aussie remains at the current weak levels the more this supports the Australian economy which will lower unemployment further and fuel wage inflation sooner or later. As soon as that emerges the RBA will consider rate hikes"