The week before last, investors all wanted Swiss francs and none wanted the Australian dollar. Last week those roles were (eventually) reversed and the Aussie was the world's best-performing major currency.

It must have been the 4.75% interest rate that attracted them, because the economic statistics had little good to say about the Australian economy. The best figures of the week were an improvement in business confidence from 0 to 2 and an uptick in consumer confidence from -8.3 to a still-negative -3.5. Home loans were down by -4.4% in July and the employment numbers were a grave disappointment.

The unemployment rate jumped from 4.9% to 5.1% and the number of people in work was almost unchanged, having been expected to rise by more than 10k. The weak employment data provided more evidence to support a minority view that the next move for AUD interest rates will be downwards.

 

Hi Everyone

The commodity-oriented Australian, Canadian and New Zealand dollars clustered just ahead of the pound after a game-of-two-halves rally and relapse. That Australian dollar ended up leader of the bunch, but only by a narrow margin and for no compelling reason.

Other than its still-attractive interest rate, there was little to commend the AUD. A slack handful of Australian economic indicators showed growth in the services sector, while manufacturing activity shrank more quickly. A slackening residential property market delivered an -8% fall in new home sales, continued softness in building approvals and a -2.6% annual fall in the RP Data-Rismark house price index.

When the Reserve Bank of Australia board meets to discuss monetary policy this week, most analysts think it will leave the cash rate at 4.75%. However, a significant minority now believe a downward move will come before the end of the year.

To find out how you can protect yourself from adverse movements in the rates- or take advantage of them if you are sending funds out of Oz contact Moneycorp today.

John