Expected rate cut weighs in on Australian Dollar

THE Australian dollar has traded strongly over the past week, starting off at 1.53 to the British pound and 0.968 to the US dollar, strengthening to 1.52 and 0.961 respectively.

The Aussie started the week slowly as investors weighed the chances of an October rate cut by the Reserve Bank of Australia. The impact of weaker commodity prices will cause an increase of pressure on the RBA to cut interest rates further.

According to Scott Haslem, chief economist at UBS, while the domestic economy has been showing signs of stabilising; post the recent RBA cuts and government cash handouts, the big-picture fundamentals have worsened rapidly over recent weeks, as iron ore prices have fallen 40 percent and there has been a further downgrading in the outlook for China.

The Aussie picked up midweek after reports showed a decrease in unemployment for August. Whilst new figures have shown that growth has remained robust in the second quarter, market sentiment shows maintaining this pace will prove a difficult task given the slump in iron ore prices.

The key drivers for the week ahead are the expected release of Chinese trade data for August, the RBA Q3 bulletin due on Thursday and the FOMC meeting on Thursday night. Despite the rally, market sentiments show that risk still remains to the downside for the Australian Dollar.

GBP/AUD: 1.5396
EUR/AUD: 1.2326
AUD/USD: 1.0396
AUD/JPY: 81.277

Exchange Rates at 09:26, 10 September 2012

Composed by Monique Chapman of 1st Contact  Note: The above exchange rates are based on “interbank” rates. If you want to transfer money to or from Australia then please register/login on our website, www.1stcontactforex.com, or call us on 0808 141 2335 for a live dealing rate. Make use of our Rate Notifier to send you alert when the Australian Dollar exchange rate reaches levels you are looking for.