New Data Cements Aussie Rate Cut

By: Barbara Zigah

The Aussie Dollar struck a 2-week low versus the U.S. Dollar as expectations of a rate cut were bolstered on weaker than expected inflation data. By all counts, most of the recent indicators have all pointed to the RBA cutting interest rates next week, but the latest data has led investors to speculate that the rate cut might in fact be deeper than originally anticipated. As reported at 12:19 p.m.(JST) in Tokyo, the AUD/USD pair was trading at $1.0256 before recovering to $1.0278, a 0.4% decline from New York trading. One economist pointed out that the inflation data nearly cements a rate cut, and the news out of Europe suggests that after the first there will be more to follow.

The Euro is also finding itself under pressure in the days following the first round pick for French president; a run off election to be held last month will pit incumbent Nicolas Sarkozy against Francois Hollande who, if elected, threatens, at the very least, the fragile treaty designed by France and Germany which compelled E.U. member states to tighter fiscal management. The EUR/USD was trading at $1.3154, recovering from a low of $1.3104 in late New York trading, and all but erasing Friday’s gain of 0.7%.