Today, Rating Agency Standard and Poor's has downgraded the forecast of credit rating of Australia AAA from positive to negative, warning that the budget surplus of the country is under threat. However the Australian dollar hardly responded to this decision.
After the decline caused by the decision by the Standard and Poor's, the Australian stock index Australia200 and the pair AUD/USD regained at the European session and went up. The yield of the Australian Government bond has changed only slightly. Australian rating is still ‘AAA’.
On Tuesday, the RBA left the interest rate unchanged at the level of 1.75%. According to the data, released earlier, inflation in Australia in June has increased by 1.5% on annual basis and by 0.6% on monthly basis. Despite slowdown of inflation and GDP in the country, Australian economy is one of the most stable in the world. Australian economy has not faced recessions in the last 24 years, which is a record for the developed industrial countries.
Currently, the AUD is supported by the rise in oil prices which have increased by 85% since the beginning of the year, when the price of a barrel of crude oil Brent was about $27. Oil and gas sector, as well as the mining and processing sector is an essential part of the Australian economy, while liquid gas is one of the main item of the Australian exports
Although RBA demonstrates adherence to the soft monetary policy, Australian interest rate is one of the highest among the countries with strong economies. This fact increases investment attractiveness of the country.
The minutes of the FOMC meeting, released yesterday, showed that the Fed does not rush to raise interest rates. Continuing uncertainty about monetary policy tightening in the USA will support the pair AUD/USD.
US Fed will take interest rate decision on 27 July. However, it is likely that the rate will remain at the current level of 0.5% until the end of the year.
Investors will be focused on the US labor market data, which will be released on Friday at 14:30 (GMT+2).
Positive data will encourage investors who buy the USD, in case of the poor data the USD will go down and the pair AUD/USD will go up.