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Sending money from Australia to Canada? brief update on the AUD/CAD

Written by Sam Coxhead on July 21st, 2011.      0 comments

12:45 PM (NZT) After breaking down through support at 1.0200 at the end of last week, the pair opened on its lows at 1.0122. Since then in mostly sideways trade it has ground its was back up towards 1.0200 but at this stage has not been able to break the 1.0230 level.
The AUD seems somewhat lethargic on quite a few crosses as the market contemplates the proposition of cuts to the cash rate from the Reserve Bank of Australia.
The Bank of Canada has kept the cash rate static at 1% this week as expected. In their report they have slightly downgraded the growth forecasts but increase the forecast for inflation.  They acknowledged that they will have to carefully consider any reduction in monetary stimulus and described the risks to inflation as balanced. The CAD has found a little support since the release and this would be broadly in line with the slightly more upbeat assessment than in their previous report. There is a high possibility that the cash rate will increase this year in Canada, and this would be CAD positive in the short to medium term.
The market remains in a holding pattern for the most part ahead of expected announcements in the US and Europe with regards to the debt ceiling and Greek debt situation. Assuming that we get some kind of positive solutions on both fronts the short term effects may prove to be limited.
Next week the focus will be Australian CPI on Wednesday and Canadian GDP on Friday.
Whilst the current levels are not quite the highs seen of late , they still do represent good value buying of CAD with Australian dollars. With the current interest rate outlooks in both Canada and Australia, the closing up of the interest rate differentials is likely to lead to the CAD outperforming the AUD over the medium term.