The Australian Dollar hit a fresh 25 year high against the greenback before reversing violently to end the day lower. Expect the volatility in the Aussie to continue with manufacturing sector PMI and the Reserve Bank of Australia interest rate decision scheduled for this evening.
Even though the RBA is not expected to alter interest rates, the recent price action of the Australian dollar suggests that the market expects hawkish comments from the central bank. According to the TD Securities inflation index, price pressures continue to grow, which validates the recent speculation. Meanwhile the New Zealand dollar is the only commodity producing country to end the day stronger against the greenback. Business confidence has improved significantly with the NBNZ confidence index increasing from -49.7 to -38.7. The Canadian dollar on the other hand completely shrugged off its better than expected Q2 GDP numbers and higher oil prices. Profit taking on the last trading day of the year and ahead of Canada day (Tuesday) is the only reason to explain today’s move.
