A nearly 3 percent drop in the price of crude oil futures to $121.41/bbl helped drive the Canadian dollar down on Monday, while the Australian dollar and New Zealand dollar struggled to make headway and ended the day little changed.
Indeed, other commodities such as gold saw mild gains, helping to stem downward pressures on the Aussie. However, the currency faces heavy event risk overnight as the Reserve Bank of Australia will be meeting. The Board is expected to leave rates steady at 7.25 percent, but the market’s eyes will be on the RBA’s policy statement. The July statement was decidedly neutral, noting upside inflation risks and forecasts for more moderate domestic demand. Based on the economic indicators released since then, including a surge in Q2 CPI and drop in Q2 retail sales, this statement will likely be similar. My fundamental bias for the Australian dollar on Tuesday: bullish. The surprisingly strong inflation numbers could invoke more hawkish sentiment amongst the RBA’s Board members.
Written by Terri Belkas, Currency Strategist for DailyFX.com
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