After some stabilization of the major currencies of Europe,the investors are now turning the selling focus to Australian dollar. The currency is lower today. AUD/USD -0.8254 –eight-months low, AUD/CAD – 0.8793 to 0.8688, AUD/NZD – broke the recent low of 1.2391 to 1.2256. The risk aversion is certainly a big factor for the sell-off but also there are other reasons too. One of the major concerns is the rate expectation in trade forex currency market.
There is a widespread belief in the market that RBA will keep the rates on hold until the end of the year due to risks of European crisis and China’s interference on economic expansion. The investors are attracted to the Australia due to high interest rates. But if the interest rates do not grow then the demand for the currency will go low and the speculators will move towards other currencies like the New Zealand dollar. The other big reason for the sell-off is the weak performance of the Australian stocks in the last two weeks.
All ordinaries are down by nearly -14% after the 52 week high of 5048. This is -11% fall in FTSE 100,-12% fall in Nikkie and -7.2% fall in DOW from 52 week high. Now if the Australian equity market shakes further the betting on the rate cut will go stronger as the investors are clearly rushing out of the Australian assets. AUD/NZD analysis- The government is supporting the New Zealand dollar by the announcement of new taxes .
The income taxes are cut by the government while the sales tax is raised. The purpose is to encourage the household savings and the reduction in foreign debts. AUD/NZD is declining continuously and the recent low of 1.2391 confirms that fall from 1. 3229 is resumed and it will follow a trend expecting a deeper fall to 1.1925.
In early this week, manufacturing data is released in the UK as well as in the European countries also. Now, the market is focusing on the release of the services appraisal performance since the service sector is the huge sector in the euro zone countries. The people are expecting growth rate that was anticipated by the Forex trading market experts for the second quarter of this year that is 2010.
In European country as well as in Germany it was predicted that the final reading of the PMI services will remain unchanged from 56 level in Europe and 53.7 in Germany as expected. PMI consolidations for the euro zone countries as anticipated at the level of 56.2.
It can only be said about the economy that in these leading sector an pace improvement is shown as the progress begins after the recession. the debt seems to be worried and the unemployment seems to be risen up in the euro zone countries.
The pound depreciation is benefiting the economy globally as predicted by the market experts. Despite the better results earned in the first quarter of the year 2010 many big companies are still doing cost cutting and lay-offs of the employees.
OECD specifies the most vigorous day are coming to the global economy as it has to do cost cutting without hurdling the recovery of the Global economy and for this need for further support is necessary from the Government policies along with the central bank.
The latest updates coming from the ECB said that- there was a rose of 0.8 percent is shown in the year 2010 as anticipated in the Forex trading market. It also assured about the fact that there was a slow pace we will see in the global economy and the recovery also seems to be uneven in the whole year.
In this week it was predicted that RBA may take meeting for giving details about the minutes of there “pause” taken in the month of may. There were seven meetings taken by the banks and issued the borrowing cost raising up to six times.
Although to trade forex in the market expected this from the starting of the May month before the intensification of the Euro zone financial crisis and also before the fall of the stock market. There was also a fall seen in the Australian market after fourth of May to 4194 from the high of 4753 index level.
There was a 12 percent low seen in the Australian currency but again it shows a rebound at the end of the month and reaches to 4479 level. But it is still at a low of 11 percent as compared to a high level of 5048 in the month of April. Overall it is expected in the market for a June hike that RBA should take a move that will ignore the previous statements of RBA, so is Aussie.
Since we have seen that on late Friday a rebound is shown by the Asian market which leads to a soft drop-down in the USD and Japanese currency yen. This is also a cause of little depreciation seen in the Japan’s commodity prices.
Deflation is still a major problem that was facing by the Japan’s market as we have seen that the CPI drops to 1.5 percent yoy while in Tokyo again there is a fall of 1.6 percent yoy in the CPI rate.
Although there was a good efforts seen in the retail sales as it rose to 4.9 percent yoy as expected by the Forex market. as we have seen a strength in DOW but the market suggest that it was only a short span of time because it is the time of correction in the stock market.
There will a change in the market situation as anticipated in the market for the June month that’ll definitely provides some strength to the market situation.
