AUD slides after antipodean central banks action

Overview

Heading into the European open all eyes were on the antipodean currencies in the wake of the latest RBNZ rate decision and the article from RBA watcher Terry McCrann. Following the RBNZ decision to keep rates on hold, NZD was weighed on by the central bank abandoning its tightening bias and stating that they expect the currency to fall further over the coming months. Elsewhere, AUD was weighed on by yesterday’s dovish article by RBA watcher Terry McCrann’s saying the RBA will almost certainly cut rates at the February meeting. Furthermore, Australian OIS are now pricing around a 53% chance for a 25bps cut at the meeting next week from ~7-12% yesterday following the release of the article, which subsequently saw AUD slide throughout the session.

Elsewhere, FX markets were relatively quiet for the bulk of the session with the latest German inflation report failing to weigh on investor sentiment as ultimately in the context of the ECB announcement only last week, it is not likely to be that much of a game-changer for the central bank. In other moves, markets were served their daily dose of early CHF strength with EUR/CHF breaking above Tuesday’s highs with the usual speculation of SNB intervention doing the rounds. This subsequently bolstered EUR with EUR also supported by the upside in EUR/AUD given the aforementioned moves in EUR/AUD.

In terms of today’s US data releases, the weekly jobs data came in below expectations and saw a modest bout of weakness in USTs, although this was short-lived as the BLS said claims are often more volatile in holiday shortened weeks. Finally, despite Gilts outperforming fixed income markets, GBP held steady alongside the broadly weaker USD in the wake of comments from BoE governor Carney who said that rate rises are expected to be more gradual than anticipated this time last year.