Aussie slips further ahead of tonight’s US interest rate decision

The Aussie spent most of the night consolidating its position after the release of the RBA’s monetary policy and ahead of the US Fed interest rate announcement.

After closing onshore down around 0.7650 the Aussie did find some support in the European trading session. This saw it climb back to its overnight high of 0.7679. But once the US traders entered the market it was all one way traffic for the Aussie and it slipped to a low of 0.7636. Some support was again found around 0.7630 and the Aussie managed to drag itself back up to close offshore around 0.7640. So far this morning we have not seen a lot of change.

Our cross rates registered weak results after the Aussie slid on the back of the RBA policy release. These results were added to in the US as traders considered the implications of the interest rate differential narrowing tonight. The result is most of our crosses are down around half a percent from yesterday’s opening rate.

With traders now focusing all their attention on the US interest rate decision tonight the Aussie is likely to be caught in a tight range today. With the imminent narrowing of the interest rate differential between Australia and the United States, investors will be considering their current asset holdings. This is likely to see a shift away from the Aussie in the short to medium term and may signal the beginning of another slide towards 0.7200.

With the timing of the RBA’s statement coinciding with the Fed’s decision tonight the Aussie is now facing a lot pressure in the short term. Importers will be hoping that this Friday’s US Trade Balance is worse than the last. This would give the Aussie a boost in the short term.