Australian dollar may drop to $0.80

August 20, 2013

US dollar was traded slightly downwards on Monday against the euro and the pound but almost didn’t change against the yen and rose Vs commodity currencies amid a poor news background - no US data were released on the first day of the week. FOMC member Jeffrey Lacker said that the first six months data proved that asset purchase hadn’t helped economic growth. 10-Year Treasury Bonds Yield continued to grow and reached its high since July, 2011. Dallas Fed president Richard Fisher believes that a sharp US Treasuries price fall is linked to the expectations of soon QE tapering off.

The euro grew after the publication of Bundesbank Monthly Report but then it lost all its growth. According to the report German economic growth in the second half of the year must stabilize after the second strong quarter. Central Bank of Germany also declared that ECB promises to keep low rates within a long period of time didn’t exclude the possibilities of rates increase in case of inflation pressure strengthening. Meanwhile, according to the Reuters Bad Loans Data in Spanish banks in June reached its historical high 11.6% Vs 11.2% in May.

The pound was traded upwards and updated its monthly height amid the increase of British economic growth outlook. Confederation of British Industry (CBI) raised its outlook for 2013 from 1% to 1.2% and for 2014 from 2% to 2.3%. The expectations for the current year turned out twice better than the budgeted level. “The economy has started to gain momentum for growth, the confidence recovers but all this is in the early stages”, - said director-general of the CBI John Cridland. Meanwhile according to the Rightmove House Prices dropped by 1.8% m/m in August – the first time this year amid a traditional fall in summer.      

The yen dropped after the publication of Japanese Merchandise Trade Balance but then it recovered amid stock markets decrease. Trade deficit in July increased to 1.02 trillion yens (the third largest in history). The deficit has been fixed for 13 months in a row. Both exports and imports growth rates turned out the highest since 2010. The exports rose by 12.2% at an annual rate although it turned out weaker than expected. The imports exceeded the outlook and rose by 19.6%. Japanese exports recovery has continued in July for the fifth month in a row due to yen weakening.

The Australian dollar reached its high within three weeks at the Asian session on Monday but then it traded downwards before the publication of Australian Reserve Bank Meeting Minutes. New Motor Vehicle Sales in Australia fell by 3.5% in July compared with the prior month. Extra pressure was put by the statements of one of the PIMCO’s board members Scott A. Mather who said that AUD might fall to $0.80 during the next year as RBA would be forced to lower the key interest rate to 2% to stimulate economic growth and put a downward pressure on the national currency.

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