Aussie and Kiwi Dollars: The RBA raised rates overnight to 4% in an attempt to cool inflation. Australia’s largest banks passed on the rate rise immediately, lifting the rate at which consumers deposit and borrow. Immediately after the news AUD/USD traded up to levels above 0.9030 before calming and trading around the all important 0.9000 level. The rate rise highlights the growing disparity between Australia and most other major economies in the world, which are at present, still stuck in a world of debt and stimulus packages. Nowhere is this clearer than in the GBP/AUD rate, which yesterday fell to 1.6545 from an open at levels above 1.6900. Despite this rate rise the New Zealand dollar sold off slightly overnight, possibly on local investors switching funds to Australian assets. In the medium to long term, the news in Australia is likely to provide support to the Kiwi as demand for high yielding currencies increases.
- I expect a range today in the GBP/AUD rate of 1.6450 to 1.6700
- I expect a range today in the GBP/NZD rate of 2.1300 to 2.1500
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