The Australian Dollar to Canadian Dollar (AUD/CAD) exchange rate is currently trading a few cents below parity after losing close to half a percent overnight. With an abundance of high tier economic data to be released out of both economies over the next 48 hours, we are likely to see major swings back and forth between the ‘Aussie’ (AUD) and ‘Loonie’ (CAD).
Today the Reserve Bank of Australia (RBA) will announce their March Rate Decision. After cutting rate by 25 basis points in February, the forecast is that the RBA will actually cut rate further from 2.25% to 2.0%. There are however, a number of economists and investors speculating that the Official Cash Rate (OCR) will be placed on hold.
If a second rate cut occurs, the AUD/CAD exchange rate will of course experience some degree of downward movement. Conversely, if the RBA do keep rates on hold, than we may see the AUD/CAD exchange rate push up more so than a usual rate hold would give rise to the Australian Dollar. The RBA Rate Decision will be announced at 1:30pm AEST today.
The market will have mere hours to digest the RBA Rate Decision before further volatility occurs in the AUD/CAD exchange rate due to the Canadian economy releasing their Gross Domestic Product (GDP) figure. Currently, the annualised GDP in Canada is sitting at 1.9% and the expectation is that this will increase to 2.5%.
Tomorrow the Australian economy will follow suit by releasing their Gross Domestic Product (GDP) figure. Currently, Australia’s annualised GDP is 2.7% and the forecast is that there will be a slight reduction to 2.5% to this economic indicator. Australia’s biggest trading partner, China, will also report on economic data today in the form of the Services and Composite Purchasing Managers Index (PMI). This will also be influential on the AUD/CAD exchange rate by creating a lift if an expansion figure is realised.
Australian Dollar to Canadian Dollar (AUD/CAD) Exchange Rate Forecast
Although the AUD/CAD exchange rate has been relatively stable over the past few weeks, following on from the major movements that were experienced from both economies cutting interest rates early last month, we are expecting a very volatile 48 hours.
The Bank of Canada cut interest rate by 25 basis point last month to 0.75% and they will announce their March Rate Decision tomorrow evening. The forecast is that we will see the governing body cut rates further to 0.5% tomorrow night which is likely to eliminate any gains made by the Canadian Dollar against the Australian Dollar as a result from the RBA cutting rates further.
Ultimately, the short term direction of the AUD/CAD exchange rate will be determined by the Rate Decision of the respective governing bodies. A secondary cut to interest rates by the Bank of Canada, in conjunction with the Reserve Bank of Australia (RBA) placing rates on hold is likely to allow the Australian Dollar to close in on the Canadian Dollar towards parity. A cut by the RBA and a hold by the Bank of Canada is likely to widen the margin between the ‘Aussie’ (AUD) and ‘Loonie’ (CAD) and a cut to rate from both economies may see the AUD/CAD exchange rate trend around similar levels.