The Australian dollar is under pressure as doubts about RBA rate hikes resurface

Toru Yamanaka / AFP / Getty Images
  • The Australian dollar fell for a second consecutive session on Wednesday on the back of renewed doubts as to if and when the RBA will begin to lift official interest rates.
  • Australian private sector capital expenditure figures for the June quarter will be released today. This carries the potential to move the Aussie.
  • There’s a raft of other data scheduled regionally and abroad, headlined by core PCE inflation in the United States.

The Australian dollar fell for a second straight session on Wednesday, weighed down by renewed doubts as to when and if the Reserve Bank of Australia (RBA) will begin to lift interest rates.

Here’s the scoreboard as at 7am in Sydney.

AUD/USD 0.7309 , -0.0028 , -0.38%
AUD/JPY 81.63 , 0.06 , 0.07%
AUD/CNH 4.9838 , -0.0059 , -0.12%
AUD/EUR 0.6243 , -0.003 , -0.48%
AUD/GBP 0.5609 , -0.0087 , -1.53%
AUD/NZD 1.0885 , -0.0048 , -0.44%
AUD/CAD 0.9436 , -0.0048 , -0.51%

After doing very little for much of the Asian session, the Aussie came under late selling pressure on news that Westpac Bank, Australia’s second-largest lender, had increased variable mortgage rates independent of the RBA, raising the prospect that other major lenders will follow suit in the days ahead.

The news had a pronounced impact on Australian government bond futures which ripped higher, reflecting the view that it lessens the chance of an official interest rate hike from the RBA in the short-to-medium term.

As Australian government bond yield sank, so too did the Australian dollar, hitting a low of .7276 against the greenback in European trade before climbing higher late in the session on the back a further lift in investor sentiment.

An upward revision to US Q2 GDP, at the margin, also contributed to the Aussie’s weakness.

Investing.comAUD/USD Hourly Chart

The other major move during the session came from the British pound on the back of renewed optimism over Brexit negotiations.

The EU’s Chief Brexit Negotiator, Michel Barnier, said the EU were “prepared to offer a partnership with Britain such as has never been with any other third country”.

The remark sent the pound surging against all of the major crosses, including the Aussie dollar.

“The hopes of a deal as opposed to a no deal have risen, although we are yet to see the details of what the EU is offering,” said Richard Grace, Chief Currency Strategist at the Commonwealth Bank.

Turning to the day ahead, local attention will likely fall on the release of Australian Q2 private capital expenditure (CAPEX) figures at 11.30am AEST.

Economists expect actual and expected CAPEX estimates to have increased during the quarter.

This 10-second guide has more on what to expect, including which parts of the report are likely to move Australian financial markets.

Australian building approvals data for July will also be released alongside the CAPEX report. A decline of 2.5% is expected.

Regionally, building permits and business confidence figures from New Zealand, along with Japanese retail sales, are the other headline acts.

Later in the session, markets will receive inflation, unemployment and import prices from Germany, CPI data from Spain, UK consumer credit, Eurozone consumer confidence, Canadian GDP along with jobless claims and personal expenditure and incomes figures, including core PCE inflation, from the United States.

The latter carries the potential to move financial markets given it’s the Fed’s preferred measure of inflationary pressures.

Finally, traders should be on the lookout for any additional out-of-cycle mortgage rate increases from Australia’s major lenders following Westpac’s move on Wednesday.

Business Insider Emails & Alerts

Site highlights each day to your inbox.

Follow Business Insider Australia on Facebook, Twitter, LinkedIn, and Instagram.