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Australian Dollar Takes a Tumble

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The Pound continued to fall a further one and a half cents against the US dollar on fears of a split between the UK and Scotland at the upcoming referendum for independence, completed on September the 18th. The UK currency reached a low point of 1.6060 yesterday after some as-expected data – Manufacturing Production increased 0.3% over the month, however this was in line with forecasts and failed to surprise the market. At the Trade Union Congress, BoE Governor Mark Carney signalled that a rate rise may occur as soon as spring 2015, which may have been a slower tightening cycle than market participants expected, with a decline of over half a cent following the speech. With the Inflation Report Hearings today, GBP volatility may be an ongoing theme.

The resilient Australian dollar has finally shown signs of heading lower with commodity prices and the terms of trade. The Dollar broke out of a range that has been in place since April, with a fall of two and a half cents sparked by sliding sentiment surveys and some underwhelming credit growth data. The NAB Business Confidence survey declined from 10 to 8 on Tuesday, while the Westpac Consumer Sentiment survey showed a decline of 4.6%. Amongst the weak surveys, Home Loan Growth was also released, showing a growth of only 0.3% over the previous month. While none of the data was particularly damming for the Australian economy, the persistent US dollar strength helped guide the currency lower to 0.91550.

Tomorrow morning should provide opportunity for trading Australasian currency pairs, with New Zealand announcing their Cash Rate during roll-over, which is expected to remain at 3.50% after a series of rate rises. Following on from this will be Australian Employment data and Chinese CPI. Employment is expected to grow strongly, with 12,200 jobs expected to be added and the unemployment rate expected to tick down slightly to 6.3%. This report follows a shocking release last month which saw the unemployment rate skyrocket. There was indication was some of the jump was related to a change in the survey rather than a dramatic deterioration in conditions. Chinese CPI is expected to moderate even lower to 2.2%.

ECB President Mario Draghi will speak at the Eurofi Financial Forum tomorrow night and BoJ Governor Kuroda will speak the following morning on Friday – neither are expected to provide a shock for traders, however the events are something to be aware of. Friday wraps up the trading week with some US data. Core Retail Sales and Retail Sales are expected to grow at 0.2% and 0.3% respectively, while UoM Consumer Sentiment is forecast to show a slight uptick to 83.2

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