After the previous week's excitement the Australian dollar followed a smoother course, covering a range of less than two and a half cents. It was not a fruitful course though: the Aussie wandered lower as the week progressed, eventually losing two cents to sterling - 1% - and losing a proportionally bigger one cent to the US dollar. It did twice as badly as the NZ dollar.

The main reason for the Aussie's decline was sentiment: it has been going down since mid-April and investors saw no reason to turn it around, mindful as they are that the Reserve Bank of Australia might be considering another interest rate cut. Thursday's consumer inflation expectations figure added to that suspicion: Australians wound down their outlook for inflation from 3.6% in April to 3.2% this month. The lower the expectation, the more scope the RBA has to lower its Cash Rate.