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Australian Dollar Jumps after RBA Hikes Rates

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Australian Dollar Jumps after RBA Hikes Rates

  • Australian Dollar rises after RBA rate hike – Souring market mood slashes gains.
  • Pound edges lower amid industrial action – Signs of easing inflation limit losses.
  • Euro firms following strong German data – Cautious ECB comments cap EUR’s upside.
  • US Dollar wavers amid shifting market mood – Fed uncertainty causes choppy trade.

Australian Dollar (AUD) Climbs after RBA Decision

The Australian Dollar (AUD) rose on Tuesday after the Reserve Bank of Australia (RBA) hiked interest rates by 25bps. RBA Governor Lowe also signalled that further rate hikes would be necessary.

However, later in the session the risk-sensitive ‘Aussie’ saw its gains slashed. The market mood soured, dampening AUD’s appeal.

Looking ahead, third-quarter GDP growth figures could boost AUD. On the other hand, a predicted slowdown in the expansion could limit gains.

New Zealand Dollar (NZD) Bolstered by Buoyant AUD

The New Zealand Dollar (NZD) was initially pushed higher by its positive correlation to the Australian Dollar on Tuesday.

The risky ‘Kiwi’ also found its gains trimmed, however, as risk sentiment faded.

With no significant New Zealand data today, the ‘Kiwi’ is likely to be affected by any shifts in risk appetite.

Pound (GBP) Volatile amid Lack of Data

The Pound (GBP) fluctuated on Tuesday amid a lack of notable UK data.

Adding to the mixed movement, the potential impact of widespread strike action on the UK economy weighed on Sterling while signs that inflationary pressures could be easing in the UK kept losses for GBP limited.

This evening, house price data could see the Pound drop if the figures slip as forecast.

Euro (EUR) Undermined by Cautious ECB Rhetoric

The Euro (EUR) initially rose yesterday as stronger-than-forecast German factory order growth boosted EUR.

However, cautious comments from European Central Bank (ECB) policymaker Philip Lane saw the single currency face some pressure.

A slowdown in third-quarter GDP growth could cap gains for the single currency today.

US Dollar (USD) Wavers as Market Mood Shifts

The US Dollar (USD) was volatile yesterday as the global market mood shifted, creating turbulence for the safe-haven US currency.

Another factor for the mixed movement was that markets are unsure whether the Federal Reserve will opt for a 50bps or 75bps hike at its next meeting, which caused some jittery trade.

The US Dollar will see no significant data today. The currency is likely to continue be affected by risk appetite and Fed rate hike bets.

Canadian Dollar (CAD) Pulled Lower by Tumbling Oil Prices

The Canadian Dollar (CAD) fell on Tuesday amid a downturn in oil prices. Crude prices slumped amid signs of a manufacturing slowdown in the US and Europe.

The Bank of Canada (BoC) is expected to raise interest rates by 50bps today. Any hawkish signals could boost CAD.

Data releases

Dec 7th 10:30    AUD       GDP Growth Rate (Q3)   0.7%

Dec 7th 17:00    EUR       German Industrial Production (Oct)         -0.6%

Dec 7th 20:00    EUR        GDP Growth Rate (Q3)   0.2%

Dec 7th 10:30    EUR        Employment Change (Q3)            0.2%

Dec 8th 01:30    CAD       BoC Interest Rate Decision           4.25%

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