The skirmish between the two commodity dollars this week opened with a bearish start, as the Canadian dollar gained advantage over the Australian currency on speculations over monetary policy decisions tomorrow. A steep 49-pip dive from the 1.0368 price high led exchanges to the price low of the AUDCAD, where downside exchanges are projected to further benefit the North American ComDoll.
Tomorrow, both the Bank of Canada and the Reserve Bank of Australia are scheduled to make public their policy decisions for the remainder of the year. Speculations of policy moves have been rampant the past few months, though both the BOC and the RBA have kept their interest rates on hold for the past month.
For the Canadian central bank, the December 4 meeting is anticipated to yield another non-change after reports last week on gross domestic product and the current-account deficit signaled the nation’s economic outlook is not as robust as it was considered earlier this year. Economic growth slowed to a 0.6 percent annualized pace in the third quarter as consumer spending gains were offset by falling business investment and the fastest export decline since the end of the last recession. For the month of September, the economy seemed to have been stalled, despite a 0.1 percent forecast by economists. Current-account deficit likewise grew to C$18.9 Billion in the third quarter, from C$18.4 Billion in the previous three months. Nevertheless, these economic data only point out that the previously anticipated increase in the 1.0 percent policy rate becomes “less imminent”, reiterating BOC Governor Mark Carney pronouncement on October 24. It seems that the “appropriate” tighter monetary policy Carney has been saying since April would be pushed farther along the road, given the risks to economic growth.
On the other hand, the RBA is believed to lower interest rates tomorrow to shield the economy from a slowdown in mining. Capital expenditure data last week showed that mining investment in 2012-2013 is projected at A$109.4 Billion, lower than the A$119 Billion that was forecast three months ago. Bloomberg reports that, “traders see an 83 percent chance the RBA will lower its overnight cash rate target by a quarter of a percentage point at next week’s meeting, a Credit Suisse Group AG index based on swaps showed. That compares with a 73 percent likelihood shown yesterday.”
True enough, Retail Sales in October failed to meet market expectations of 0.4 percent, as the data came out with a 0.0 change. This reflects that consumers have cut spending on household goods. Additionally, the Building Approvals report for tomorrow is estimated to show a minus 1.8 percent change for October. These economic fundamentals bode ill for the Aussie today, and likely even until tomorrow.
Considering the effect of these news on AUDCAD price activity, a sell bias is recommended today. Technical price corrections are still likely, so take a cautious approach.
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