The Australian dollar ended its 10 day winning streak following soft manufacturing PMI data and a sharp reversal in gold prices.
The slowdown in manufacturing activity was not surprising given the strong currency and softer employment. Tonight the Australian dollar will continue to be in play with the Reserve Bank of Australia interest rate decision, retail sales and the trade balance due for release. The RBA is not expected to alter interest rates and that disappointment could weigh on the Australian dollar. When the RBA leaves rates unchanged, they do not release a statement. Even though commodity prices have been soaring, the strength of the Australian dollar is also expected to trigger a sharp increase in the trade deficit. As for retail sales, that is expected to slow modestly. There are no Canadian or New Zealand data due for release which means the fluctuations of these currency pairs will be driven by the market?s overall demand for high yielding currencies as well as the movements of commodity prices. There is one other thing to mention, which is the $8.5 billion acquisition of US based Commerce Bancorp by bank Toronto Dominion, Canada?s third largest. The Canadians are spending their new found wealth - six months ago, that deal would have cost TD 1.3B more Canadian dollars.
Written by Kathy Lien, Chief Currency Strategist for DailyFX.com