Aussie Sinks After Weaker Inflation Report | GO Markets Daily FX Commentary

The Aussie dollar tumbled yesterday after as hopes of a rate hike are struck down by a weakened inflation report. Prior to the announcement, the Aussie crept closer to the 94 US cent mark but was aggressively sold after inflation slowed to an annualised rate of 2.9%. Still, inflation remains at the high end of the RBA’s target of between 2-3% but yesterday’s data confirmed that the RBA will not be looking to change monetary policy anytime soon. If the inflation report wasn’t damaging enough to the local currency, Chinese Flash Manufacturing data added further pressure to the Aussie forcing it to daily lows of 0.9266 against the greenback.

Despite Bank of England policy makers voted unanimously to keep interest rates on hold, as revealed by yesterday’s minutes, it is evident that the economic recovery is broadening. Whilst members may be hesitant to react to an improved economic outlook by raising interest rates prematurely, there are clear signals of an improved economy, notably a rise in earnings growth which has been an obstacle for some time. As hopes of a rate hike are put back temporarily, Sterling came under some pressure reaching lows of 1.676 against the greenback.

Weaker US manufacturing and home sales combined with earlier Chinese manufacturing data caused the Japanese Yen to climb the most in 2 weeks against the US dollar. European manufacturing and services data managed to shed some positivity on the European economy, beating expectations and causing the Euro to gain some support. As tensions escalate in Ukraine, safe haven currencies are on the radar, with an absence of European data towards the end of the week, traders are likely to adopt a risk-off attitude.