Global Markets:
- Asian stock markets: Nikkei down 0.25 %, Shanghai Composite lost 0.05 %, Hang Seng fell 0.50 %, ASX declined 1.00 %
- Commodities: Gold at $1188 (-0.05 %), Silver at $16.71 (+0.20 %), WTI Oil at $60.25 (+0.05 %), Brent Oil at $64.85 (-0.20 %)
- Rates: US 10 year yield at 2.19, UK 10 year yield at 1.86, German 10 year yield at 0.43
News & Data:
- Reserve Bank of Australia (RBA) leaves cash rate unchanged at 2.0 %
- RBA: Lower AUD needed
- RBA: Judged policy appropriate for time being
- RBA: Public spending seen subdued
- RBA: Economy growing below long-term average
- RBA: A key drag on private demand is weak business CapEx
- RBA: Monetary policy needs to be accommodative
- Australia Current Account -A$10.7bln, Expected: -A$10.8bln, Previous: -A$10.2bln
- Japan Average Earnings 0.9 % y/y, Expected: 0.4 %, Previous: 0.0 %
- Japan Monetary Base 35.6 % y/y, Previous: 35.2 %
- BoJ Governor Kuroda: Will not comment on FX level or speed of move
- Japan FinMin Aso: Will carefully watch FX movements, declines to comment on JPY directly: BBG
Markets Update:
The RBA left the cash rate unchanged overnight, at 2.00 %. While they didn’t cut rates, they maintained their overall dovish stance, saying that growth remains below the long-term average and that monetary policy will stay accommodative. The central bank also included the usual comment, that a lower AUD exchange rate is needed. The reaction in the FX market has been mixed. AUD/USD rallied initially as some were expecting a rate cut today, but stopped at 0.7662 so far. We could see some further short covering in AUD in the later trading sessions, with the key resistance levels now being 0.7670/75 and 0.7745/50.
In the other major pairs, trading was rather quiet overnight given the lack of data/news. USD/JPY briefly traded above 125.00, but quickly retraced back to 124.70. However, the pair remains still very bid and while the move looks stretched in the short-term, it is tough to fight such a strong trend. Meanwhile, price action in EUR/USD remains quite choppy, partly due to the Greece headlines every day. It is likely we’ll see the pair trading in a 1.0850-1.10 ahead of the ECB meeting on Wednesday.
Upcoming Events:
- 08:00 BST – Spanish Unemployment Change
- 08:55 BST – German Unemployment Change
- 08:55 BST – German Unemployment Rate
- 09:30 BST – UK Construction PMI
- 10:00 BST – Euro Zone CPI & Core CPI
- 15:00 BST – US Factory Orders
