The central banks of economically developed countries, whose currencies belong to the major pairs are traded on the so-called Grand Forex. It continues to demonstrate a clear dependence on the behavior of the US Federal Reserve.
Today, the final decision of the Reserve Bank of Australia to leave the key interest rate unchanged was predictable. The regulator motivated his actions by the fact that the risks of lowering the growth of the national economy increased amid a decline in the growth of the global economy, despite the fact that there are still prospects for the growth of the global economy. The bank also said that GDP draws a weaker picture of the economy than the data from the labor market, while inflationary pressure remains low and stable. Previously, the same decision on interest rates was taken by the Central Bank of New Zealand, motivating its actions in a similar vein.
In the wake of the outcome of the meeting of the Australian Central Bank, the local currency paired with the US dollar came under noticeable pressure and at the same time, its decline was clearly within the established local range of 0.7060-0.7160.
In the previous article, we raised the topic of the reasons for such dynamics, namely the side in the currency markets. In our opinion, this picture will continue once again and it seems for a long period of time until it becomes clear whether the slowdown in the global economy and similar trends in the United States will stop. Will the eurozone or Germany, in particular, will slide into recession will China succeed in restoring economic growth? In addition, the situation around Brexit keeps investors in the tone of uncertainty on its prospects as they say.
Probably, the overall picture will change only when the Fed finally makes a decision, for instance, to lower interest rates in the wake of the continued slowdown in US economic growth, but this can happen only after reaching an agreement on trade between Washington and Beijing. However, the question is: when will this happen and what will they be? Therefore, we continue to expect general lateral dynamics in the currency markets of major pairs, where the US dollar is present, at least in the short term until May, when this agreement can be concluded.
Forecast of the day:
The EUR/USD pair is trading below 1.1215 while pending the publication of production inflation data in the eurozone and the values of durable goods orders in the States. If manufacturing inflation shows a decline and orders in the US increases as expected, then the pair will head for 1.1175.
The AUD/USD pair continues to move in the range at the upper boundary of the short-term downtrend, which is visible on the daily chart. If the data from the United States will be strong, the pair will overcome the mark of 0.7075 and continue to fall to 0.7040. However, if they are weaker than expected, the price may return to 0.7120.
