The Australian dollar (AUD) has plunged to its mid-March levels against the USD leaving the exchange rate touching a low of 0.6591 this week, making it a formidable challenge to reclaim its previous April highs. This task has been further complicated by the latest Australian CPI figures, which fell below expectations when released on Wednesday this week.
What implications does this hold for the future? With an increase in U.S. manufacturing, all attention has turned to two critical announcements. The first one pertains to U.S. unemployment and GDP data, which are scheduled to be released on Thursday evening, and will likely determine rate movements until the RBA's next announcement on Tuesday. Additionally, the Federal Reserve is anticipated to follow up with a 0.25% interest rate hike on Thursday of next week.
This week, the Australian Dollar to British Pound exchange rate (AUD/GBP) has hit a new low not observed since February 2022 reaching 0.5281, indicating a solid foundation for bringing funds into Australia.
However, the burning question is, how long can the UK battle inflation? Despite the best efforts of other international players such as Australia to control inflation, the UK is yet to make any significant progress. The ongoing energy crisis has placed significant pressure on UK households, resulting in a sharp decline in house prices across Britain. The upcoming housing data, scheduled to be released on Tuesday morning, is likely to continue this trend. Nonetheless, it's worth noting that new mortgage approvals for the UK witnessed a rise last month.
Following the RBA's decision on Tuesday, we expect to receive a policy statement on Friday, which may impact the AUD's upward trajectory. Those who are considering shifting AUD should keep an eye out for positive news to boost the Australian dollar's value.
Over the past 10 days, there has been significant volatility in the market, with prices fluctuating up to 2% within the period and falling from a recent high of 1.0930 to a low this week of 1.0751.
The AUD's Consumer Price Index (CPI) released on Wednesday had a profound impact on the market and has established a new position. While the Reserve Bank of Australia (RBA) is expected to maintain current rates, the Reserve Bank of New Zealand (RBNZ) has been making aggressive moves in recent months. The upcoming release of New Zealand's unemployment data next Wednesday is anticipated to remain tight and put pressure on the RBNZ to either hold or increase rates in the upcoming period.
As a result, we expect the AUD/NZD to experience further volatility in the coming week.