Last Thursday was the day the Reserve Bank of Australia has been dreading for months. The European Central Bank turned interest rates into the twilight zone, meaning investors all over the world will be looking for other places to park their cash. With the promise for even more stimulus in the future from the ECB, any hope Glenn Stevens harboured for a weaker Aussie has been dashed.
Dukascopy traders are cautious about future Aussie's perspectives, as they are buying the currency only in 52% of the time. Analysts from Westpac Banking Corp. however, are more optimistic, saying the Australian Dollar, which is already the best performing currency this year, is likely to extend gains after Mario Draghi pulled the trigger. According to Dukascopy currency index, the Aussie soared 1.07% over the last 20 days, and 6.36% during the last 250 trading days.
In October 2013, RBA's Governor claimed the currency is overvalued, calling for a significant depreciation of the currency. A couple of months ago, the central bank pledged to keep the monetary policy on hold, meaning borrowing costs will remain at record lows for some time. In fact, the latest performance of the Oz economy and global developments lifted the possibility the RBA will revive the easing cycle.
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