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Home ANALYSIS

The AUD is the strongest and the GBP is the weakest as NA traders enter for the day

A.R Chowdhury by A.R Chowdhury
March 17, 2022
Reading Time: 7 mins read
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The AUD is the strongest and the GBP is the weakest as NA traders enter for the day

Forex

Th strongest to weakest of the major currenciese

The  AUD 
AUD

The Australian dollar (AUD) is the official currency of Australia, which is also used in Christmas Island, Cocos (Keeling) Islands, Norfolk Island, as well as independent pacific states.Introduced in 1966, the AUD is currently the fifth most traded currency in the world, behind only the US dollar, euro, Japanese yen, and British pound.The currency is very important to forex markets and is routinely used as a carry trade against other majors.The Reserve Bank of Australia (RBA) is the central banking authority tasked with the management and issuance of AUD banknotes.What Factors Affect the AUD?The AUD is more susceptible than other currencies to macroeconomic factors. Overall, monetary policy is the largest mover of the currency, including interest rate differentials.Beyond Australia, commodity prices such as those of precious metals and others are also important to the AUD and can cause fluctuations in its value relative to other currencies.Global risk sentiment and confidence are also indicators that are closely tracked given their correlation to the AUD.This is due to the AUD being seen as a commodity currency, and also used as one of the most popular growth and risk proxies in global financial markets.Any positive mood in the global market will likely cause the AUD to climb, while if there is a prevailing pessimism, the AUD will often decline.On a domestic scale, government credit ratings can also impact the AUD. Australia’s credit rating influences the risk profile of its debt.This trend directly influences the cost the government has to pay on the debt it owes.

The Australian dollar (AUD) is the official currency of Australia, which is also used in Christmas Island, Cocos (Keeling) Islands, Norfolk Island, as well as independent pacific states.Introduced in 1966, the AUD is currently the fifth most traded currency in the world, behind only the US dollar, euro, Japanese yen, and British pound.The currency is very important to forex markets and is routinely used as a carry trade against other majors.The Reserve Bank of Australia (RBA) is the central banking authority tasked with the management and issuance of AUD banknotes.What Factors Affect the AUD?The AUD is more susceptible than other currencies to macroeconomic factors. Overall, monetary policy is the largest mover of the currency, including interest rate differentials.Beyond Australia, commodity prices such as those of precious metals and others are also important to the AUD and can cause fluctuations in its value relative to other currencies.Global risk sentiment and confidence are also indicators that are closely tracked given their correlation to the AUD.This is due to the AUD being seen as a commodity currency, and also used as one of the most popular growth and risk proxies in global financial markets.Any positive mood in the global market will likely cause the AUD to climb, while if there is a prevailing pessimism, the AUD will often decline.On a domestic scale, government credit ratings can also impact the AUD. Australia’s credit rating influences the risk profile of its debt.This trend directly influences the cost the government has to pay on the debt it owes.
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is the strongest and the  GBP 
GBP

The Great British pound (GBP) or pound sterling is the official currency of the United Kingdom, Jersey, Guernsey, the Isle of Man, Gibraltar, South Georgia, and other pacific territories.The GBP is currently the fourth most-traded currency worldwide in forex markets after the US dollar, euro, and Japanese yen.As the oldest currency in continual use, the GBP holds great weight on the world market and is also the fourth largest reserve currency.The Bank of England (BoE) is the central banking authority responsible for the curation of the GBP, issuing its own banknotes, as well as regulating the issuance of banknotes by private banks in both Scotland and Northern Ireland. What Factors Affect the GBP?Like any widely traded currency there are several factors that affect the GBP. As is often the case, monetary policy is extremely impactful. Any announcements or policy decisions by the BoE are always closely watched given its potential to move the GBP.Additionally, consumer prices (CPI) in the UK as well as levels of inflation carry a lot of weight and routinely affect the value of the GBP in forex markets.Other metrics of note include measures of gross domestic product (GDP) in the UK or growth, consumer sentiment, or confidence.Most recently, the drama surrounding Brexit as well as the potential fallout of negotiations have added another layer of uncertainty to the GBP.The UK at the time of writing is headed for a historic schism with Europe, though a deal has not yet been agreed upon with both sides unable to come to an agreement.With a smooth resolution nowhere in sight, any developments or an eventual finality to Brexit will be extraordinarily important to both the short- and long-term value of the GBP.

The Great British pound (GBP) or pound sterling is the official currency of the United Kingdom, Jersey, Guernsey, the Isle of Man, Gibraltar, South Georgia, and other pacific territories.The GBP is currently the fourth most-traded currency worldwide in forex markets after the US dollar, euro, and Japanese yen.As the oldest currency in continual use, the GBP holds great weight on the world market and is also the fourth largest reserve currency.The Bank of England (BoE) is the central banking authority responsible for the curation of the GBP, issuing its own banknotes, as well as regulating the issuance of banknotes by private banks in both Scotland and Northern Ireland. What Factors Affect the GBP?Like any widely traded currency there are several factors that affect the GBP. As is often the case, monetary policy is extremely impactful. Any announcements or policy decisions by the BoE are always closely watched given its potential to move the GBP.Additionally, consumer prices (CPI) in the UK as well as levels of inflation carry a lot of weight and routinely affect the value of the GBP in forex markets.Other metrics of note include measures of gross domestic product (GDP) in the UK or growth, consumer sentiment, or confidence.Most recently, the drama surrounding Brexit as well as the potential fallout of negotiations have added another layer of uncertainty to the GBP.The UK at the time of writing is headed for a historic schism with Europe, though a deal has not yet been agreed upon with both sides unable to come to an agreement.With a smooth resolution nowhere in sight, any developments or an eventual finality to Brexit will be extraordinarily important to both the short- and long-term value of the GBP.
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is the weakest as North American session begins. The S&P is up 4.4% and the Nasdaq up 6.8% over the last two days in the face of a Fed rate hike and the Fed raising their rate hike projections to 7 from 3 in December. The Bank of England just raised their rates by 0.25% to 0.75% as expected. Yesterday, the USD gave up initial gains after the decision, and is continuing the run to the downside today. Today, the GBP has given up their gains and is now trading lower on the day after their decision.

The AUD was boosted by the follow through buying after China government and central bank put their support behind the stock market and economy on Wednesday. The AUD also benefitted from a strong employment report that showed a gain in employment of 77.4K vs 36.0K. The unemployment rate also fell from 4.2% last month to 4.0% this month. The GBPUSD is lower after the BOE raise rates by 25 basis points as expected.

The Russia Ukraine war continues with Russia bombing a theater that provided shelter for children. Yesterday Biden called Russian Pres. Putin a war criminal. Russia shot back in defense and also called domestic resistance “scum and traitors”. Some think the chance for a diplomatic solution is now farther away.

A snapshot of markets currently shows:

  • Spot gold is up $12.60 or 0.62% at $1939
  • Spot silver is up $0.16 or 0.61% $25.24
  • WTI crude oil is back above $100 at $100.38 that’s up $5.40
  • the price of bitcoin is trading at $41,100. After trading as high as $41,497 and is lows $40,496

In the premarket for US stocks, the major indices are trading marginally lower:

  • Dow industrial average -112 points after yesterday’s 518.76 point rise
  • S&P index -17.81 points after yesterday’s 95.41 point rise
  • NASDAQ index -71 points after yesterday’s at 487.93 point rise

In the European equity markets, the major indices are trading mixed:

  • German DAX -0.6%
  • France’s CAC unchanged
  • UK’s FTSE 100 +0.5%
  • Spain’s Ibex -0.3%
  • Italy’s FTSE MIB -0.9%

In the US debt market, yields are lower after yesterday’s move to the upside especially in the short end. The two – 10 year spread is down to 21.1 basis points.

Yields

US yields are lower

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In the European debt market, the benchmark 10 year yields are also mostly lower:

European

European benchmark 10 year yields are lower
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A.R Chowdhury

A.R Chowdhury

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