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Stability flagged for Cash Rate as Aussie Dollar goes up
The Aussie Dollar took an immediate hike shortly before lunch today on the back of the Reserve Bank of Australia (RBA) February ‘Minutes’ release which forecast a period of stability in the official cash rat
The RBA said it would be “prudent” to keep the official lending rate unchanged, and that with an expected broad evolving economy, there would be prudency in a period of stable interest rate
The AUD shot up to around 0.90750 USD; to 1.08550 NZD and around 92.750 JPY shortly after 11.30am before settling in the next hour. At the same time, the ASX200 Index kept a steadier course in and around the 5360 mark.
By Tuesday afternoon (AESDT) the AUD was buying 0.90530 USD, 1.08440 NZD and 92.790 JPY.
The RBA suggested there were clear signs over the past few months the current monetary policy stimulus was having an intended effect. It noted the exchange rate had also depreciated further since the December meeting. “If sustained, a lower exchange rate would be expansionary for economic activity and assist in achieving a balanced growth of the economy
The RBA determined that GDP growth was expected to strengthen a little through 2014, although at a below-trend pace. Growth was then expected to improve above-trend pace by mid-2016. The outlook for the labour market had little or no change as softer employment data had been largely off-set by the slightly stronger growth outlook.
Inflationary pressures and a hot housing sales market were also factors kept under a close watch in the next quarter.
GBP/USD
The Pound hit 1.67300 by mid-afternoon today, and may forge higher against the US Dollar. The trick will be to find the current “ceiling,” so shorter expiring trades could be the way to go
USD/CHF
A lot of intrigue here, with the US Dollar under nagging pressure, and could well head to another market ‘low’ around 0.89. The Swiss have a crucial trade balance release late Thursday, and it might be the catalyst. Even by late afternoon (AEDST) today, the USD came off from around 0.89280 to 0.89214. Short expiries either side of the announcement might be the plan. If the USD “squeeze” happens, look for “sell” opportun
AUD
In Australia, the monthly CB Leading Index, based on seven economic indicators, is due out before lunchtime tomorrow (Wed). The number dipped to 0.2% last month, its weakest gain in three months, although the markets are optimistic for a better result this time around.
AUD/USD: Chinese Flash Manufacturing PMI release later on Thursday will be critical and usually has a big swing effect on this pair, with China being Australia’s top trading partner. Manufacturing PMI slipped to 49.6 points in December, the first time below the 50-point level since last June, and well off the expected 50.6 points. The markets are forecasting another weak result, and a reading below 50 points is likely to trigger a contraction in the industry, and may see the AUD weaken against the majors
EUR/GBP: Huge week for the Pound, with Purchase Facility and Official Bank Rate Votes on Thursday heading a raft of economic data which includes crucial unemployment numbers and quarterly average earnings. Given manufacturing numbers and consumer confidence across Europe preceed an official economic forecast on Friday, this could be a volatile pair!
AUD/JPY: The Aussie came off briefly yesterday (Mon) after a poor Japanese (JPY) quarterly GDP number of 0.3% well under the 0.7% forecast, but the full recovery was in place within a couple of hours. The Yen is vulnerable now against most major crosses, and the Aussie was trading up in the first few hours today, so keep an eye on this pair.
Both the Aussie & US Dollar went up on the Yen (JPY) late this afternoon after the Bank of Japan (BOJ) - as anticipated - held its course on financial asset purchases as the Japanese economy tracks towards a stable two per cent inflation.
In announcing it's planned recovery line, the BOJ said it would extend by 12 months two programs that offer to banks cheap loans as a way to increase overall lendings and certain crucial sectors of the economy.
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