Aussie Falls as RBA Cut Growth Forecast

The Australian dollar tumbled as the Reserve Bank of Australia revised its growth forecast for this year downwardly, spurring speculation that more interest rate cuts will follow.

The RBA forecast that nation’s gross domestic product will rise 3 percent, compared to the previous estimate of 3.5 percent. Inflation growth was revised from 3 percent to 2.5 percent. The central bank wrote in its policy statement:

    The assumed high level of the exchange rate and a weak short-term outlook for building construction are expected to result in subdued growth outside of the mining sector in the near term.

Risk aversion sentiment that was ruling markets yesterday wasn’t helping the Aussie. The MSCI Asia Pacific excluding Japan Index slipped 0.6 percent. Between domestic problems and bad news from overseas, it is no surprise that the growth-linked Australian currency was weakening.

AUD/USD slid from 1.0262 to 1.0170 — the lowest rate since January 9. AUD/JPY sank from 82.31 to 81.22, while the daily low of 81.17 was the lowest since February 1. EUR/AUD climbed from 1.2811 to 1.2918, the highest level since December 22 before closing at 1.2857.

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Euro Drops Ahead of Elections on Weekend

The euro was falling today as elections in European countries this weekend and the next week add to uncertainty regarding the ability of the eurozone to withstand its financial crisis.

Greece is the country that was most damaged by the crisis and its parliamentary elections on May 6 are very important for the well-being of the euro. As Holger Schmieding, a chief economist at Berenberg Bank, outlined:

    The biggest risk for markets is that in Greece we just don’t get a government and it becomes completely unclear whether or not Greece will be able to comply with the austerity program. If we’re unlucky on Monday morning, markets may wonder whether Greece will be out of the euro within a few months.

There are also presidential elections in France and mayoral in Italy. Votes in German states of Schleswig-Holstein and North Rhine-Westphalia should show how popular (or unpopular) is Angela Merkel and her party.

The euro jumped against the US dollar after the unfavorable US non-farm payrolls, but quickly resumed its decline. The elections may actually be positive for the euro if the eurozone will change its “austerity” path to the one of ”stimulating growth”.

EUR/USD climbed from 1.3152 to 1.3178, but then sank to 1.3083 as of 20:52 GMT today. EUR/JPY slid from 105.45 to 104.42, touching 104.39 intraday — the lowest rate since February 17. EUR/GBP sank from 0.8127 to its daily low of 0.8094 (was the lowest since June 30, 2010).

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Pound Gains vs. Euro Ahead of Elections in France & Greece

The Great Britain pound gained against the euro today as Forex traders were nervous before the election in Greece and France this week. The currency fell against the US dollar despite the negative fundamental data from the United States.

The French will vote in the final round of the presidential elections on May 6, while Greeks will choose a new parliament. Some participants use plenty of anti-euro rhetorics in their speeches. It is likely that whoever would win the elections would be more moderate in their actions than in their speeches, but uncertainty makes traders shy away from the shared 17-nation currency. Fundamentals in Britain itself are bad enough to prevent the pound from rallying against other currencies.

EUR/GBP fell from 0.8127 to 0.8110 as of 15:27 GMT today. GBP/USD was down from 1.6176 to 1.6153.

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