The Aussie fell heavily on Thursday, closing at 0.7091(-76 pips) against the greenback. Despite producing a stronger Australian job reports for January, the bullish run was very short lived as it was weighed down by the combination of growing RBA rate cut talk and geopolitical concerns over China, a major iron ore port is reportedly stalling Australian shipments. After opening the session at .7163, the AUD/USD rose to as high as .7207 midway through the session, assisted by the release of a strong Australian jobs report for January. However, Westpac Bank ensured the rally didn’t last long, becoming the first of Australia’s big four bank’s to call for rate cuts from the RBA this year.“We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%,” said Bill Evans, Westpac’s Chief Economist in a statement. “With the slower growth profile we now expect to see the unemployment rate lift to 5.5% by late 2019. That makes a strong case for official rate cuts to cushion the downturn and, in turn, meet the RBA’s medium term objectives.“Westpac now expects the Reserve Bank to cut the cash rate by 25 basis points in both August and November this year.” The announcement saw markets move to price a full 25 basis point rate hike by the end of the year, helping to drag Australian bond yields and dollar lower. The Aussie was delivered a further hit in late Asian trade following a report from Reuters that China had banned imports of Australian coal at the northern Chinese port of Dalian, sparking renewed concern about a growing rift between the two countries.
The Pound weakened to 1.3032(-11 pips) against the greenback on Thursday. European Union officials want Prime Minister Theresa May to secure the changes she wants on the Irish backstop in the Parliament before asking EU leaders to sign them, which seems quite logical, as the other way around isn't working. The UK Parliament is scheduled to vote next Feb 27, and it has been said that the EU would not offer a new legal declaration, which will only clarify points but include no changed, until Feb 28. According to the same source, the text may be agreed on mid-March and put for approval to EU leaders in the summit due March 21-22. In this scenario, Sterling buyers have little to work with. This Friday, the UK will only see the release of a CBI survey on realized trades.
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