Australian dollar's 'excellent' session comes to a brutal halt as the ugly face of the Eurozone crisis peeks through once more

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Category: Australian Dollar News

Written by Will Peters

"We may see sterling bounce further amid falling equities today" - Richard Driver at Caxton FX.

The Australian dollar (Currency:AUD) had been happily coasting along over the course of the past 24 hours before being rudely jolted at the opening of the European session. (Latest FX forecasts are published at our IMT site, access is Free via this entrance path on Facebook).



The pound Australian dollar exchange rate has reversed direction, GBP-AUD is now only 0.05 pct in the red at 1.5440 - the pair had been as low as 1.5395.

The Australian dollar to US dollar exchange rate is now 0.2 pct lower on Wednesday's close at 1.0060.

High confidence levels in last night’s Asian session helped the aussie dollar to some significant gains.

"Expectations that the Reserve Bank of Australia will not decide to cut interest rates again next week are helping the AUD, driven by some upbeat speeches from policymakers and improved economic growth figures," reports Richard Driver at Caxton FX.

Sterling managed to find decent support half a cent lower, "we may see sterling bounce further amid falling equities today," says Driver.

Indeed we may. The deterioration in investor mood in European trade has hit commodity and equity prices - a key driver of demand for the Australian currency.

The Eurozone situation remains poor with Italian bond yields sitting north of 6 pct and Spanish yields above 7 pct.

A slew of economic data releases have confirmed that the Eurozone is likely to suffer a sharp retraction this quarter.

Ahead, all eyes are on the EU Summit. As Gareth Berry at UBS points out, expectations are low, so any positive surprises could turn into a bounce in risk-on assets, thus the Australian dollar would be a winner.