Elsewhere yesterday, the Australian dollar initially took strength from Monday night’s strong inflation figures but fell away during the course of the day on the back of good UK employment data. The figures, which came in at 2.7%, up on 2.2% in the previous quarter, significantly reduced the chances of the Bank of Australia opting for a rate cut this year. Sentiment in the market over recent months had been in favour of a cut in interest rates, with Australian policy makers looking to devalue the currency in order to boost export sales. These inflation figures, however, mean that any rate cut could prove dangerous going forward, and policy makers will most likely have to rely on talking-down the currency.
The Canadian dollar dropped down to four-year lows. In contrast to what we have seen in Australia, the Canadian central bank lowered its inflation forecast – which was the driving force behind interest rates being held at 1% – yesterday afternoon, as policy makers feel the currency is strong enough to be a challenge to the nation’s exports. Retail sales figures released this afternoon could provide a lifeline for the Canadian currency.
The Turkish lira continued to struggle yesterday, extending its longest stretch of losses in 3 months following comments from the central bank suggesting that no interest rate change will be implemented until next week.
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