The Australian Dollar rose after the announcement of the Federal Bank of Australia and its monetary policy, while the Japanese Yen rose probably because geopolitical risks are a concern for investors.
Australian Dollar
The Reserve Bank of Australia left its benchmark interest rate unchanged at 1.5%. The Reserve Bank of Australia mentioned that “expectations are for economic growth to increase gradually over the next couple of years to a little above 3%, and the decision to leave rates unchanged is consistent with sustainable growth in the economy and achieving the (Bank’s) inflation target (of 2 to 3%) over time.”
However the Reserve Bank of Australia also commented that “an appreciating Australian dollar would complicate the country’s economic rebalancing having a focus on household spending and services”. The Australian economy also had a wider Current Account Balance deficit for the 1st quarter of the year, which was completely ignored by the forex market. A large Current Account deficit means net capital outflow of the local currency which in theory leads to its depreciation over time.
The Australian Dollar ignored this negative Current Account reading and appreciated against the US Dollar as AUD/USD moved higher from 0.7452 to 0.7521.
Japanese Yen
Labor Cash Earnings for the month of April were better than expected at 0.5% versus 0.3% showing an increase in earnings per employee, and probably higher personal spending and consumption or economic growth. Lately the Japanese economy shows consistent signs of economic growth and some geopolitical risks we mentioned yesterday boosted the Yen as a safe haven and it appreciated significantly as USD/JPY moved lower from 110.40 to 109.15.
Euro
A stronger than expected Euro-Zone Sentix Investor Confidence reading at 28.4 vs 27.4, but also strong Euro-Zone Retail Sales at 2.5% vs 2.1% estimates for the month of April on yearly basis were positive for the Euro as it appreciated against the US Dollar, the EUR/USD moving from 1.1234 to 1.1282. The Euro-Zone shows lately positive signs of solid economic growth.
Other important financial news
Gold prices made a new high at almost $1300 an ounce and oil prices had a nice recovery. Without any other economic news, the Swiss Franc and Canadian Dollar rose against the US Dollar.
The British Pound also without any significant economic news other than maybe rumors on polls about the forthcoming elections appreciated against the US Dollar as GBP/USD moved higher from 1.2860 to 1.2948.
Key financial news for Wednesday 7th June 2017
The Australian Gross Domestic Product for 1st quarter of the year is important to check for potential further economic growth for the Australian economy, plenty of economic data for the Japanese economy, Markit Germany Retail PMI and German Factory Orders, RICS House Price Balance for the UK and US Crude Oil Inventories, form a full economic calendar with plenty of economic data to move the forex market.
The US Dollar is weak against almost all its major counterparts for now, a trend that could change if the Fed decides later this month to increase its key interest rate.
