AUD Stops Growth after RBA Statement

The Australian dollar stopped growing on the Forex market today after the Reserve Bank of Australia mentioned economical growth moderation in its monetary policy statement.

The RBA kept its 12-year high interest rates unchanged at 7.25 percent points today during the scheduled monetary policy meeting ruled by Glenn Stevens.

The Aussie has reached its 24-year record high level against the U.S. dollar recently and traded near that level before the monetary policy meeting. Reserve Bank of Australia Governor Glenn Stevens mentioned that the output growth may moderate this year, causing the currency drop from its high. The drop was limited due to the mention of the remaining inflation risks that leave possibilities for the further rate hikes:

In order to reduce inflation over time, growth in aggregate demand needs to be significantly slower than it was in 2007. Evidence is accumulating that this is occurring. Indicators of household spending have recorded subdued outcomes over recent months, and demand for credit by both households and businesses has weakened… Given the opposing forces at work, considerable uncertainty remains about the outlook for demand and inflation.

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Euro Rose on Support of ECB Rates

The euro rose today during the early Forex trading session, as the European politicians changed their mind on the ECB interest rate policy and traders became more confident that Jean-Claude Trichet won’t reduce the rates this week.

The ECB used its every recent statement to convince the market participants

that the inflation is a bank’s primary concern and that it won’t go for lower rates to sustain the economical growth. Meanwhile European government officials insisted on lower rates and a weaker euro to ease the pressure on the exporters.

Now the politicians from France, Belgium and Luxembourg, who previously insisted on weaker euro, agree that the current inflation rate is dangerous and that ECB shouldn’t lower the interest rates in this situation.

The European Central Bank refuses to follow Federal Reserve and Bank of England decisions to cut interest rates on the background of the global financial turmoil. Hawkish stance on rates allows euro to further appreciate against the other currencies.

Today EUR/USD rate increased 1.5429 to 1.5494 as of 8:29 GMT — the first daily growth after two days of dollar rally. EUR/JPY followed the trend and went up from 162.44 to 163.01 as the carry trade positions strengthened and the yen fell.

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Dollar Sinks, EUR/USD Reaches 1.6011

Euro reached a new historical maximum against the U.S. dollar today after another European Central Bank official stated that the bank will be acting thoroughly in order to keep the consumer price inflation rate down.

According to Christian Noyer, the ECB is not going to ease the monetary policy because of the strong inflation in Eurozone. And while some European countries vote for a weaker euro (to support national exporters), ECB is standing strongly against any actions that will accelerate the CPI, which is above the current central bank’s target rate.

Many currency analysts expect euro to continue its bullish trend against the greenback as it’s now clear that the European interest rates are not going to be reduced in the near months. EUR/USD can reached 1.6500 in the next 3 to 6 months according to them.

Existing home sales in U.S. also helped dollar to fall against the euro — according to the report by the National Association of Realtors in March they fell from 5.03 million to 4.93 million (at annual rate).

EUR/USD went up from 1.5910 to 1.5996 today on Forex with the daily maximum at 1.6011- a new absolute record for this currency pair.

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