Aussie dips, RBA keeps interest rates unchanged

Summary:

The Australian Dollar (AUD/USD) dipped to 0.6600 from 0.6620 after the RBA kept the cash rate unchanged at 4.35%. While the move was widely expected, a firmer Greenback weighed on the Aussie Battler.

The Dollar Index (DXY), which measures the Greenback’s value against a basket of 6 major currencies, rebounded to 105.37 from 105.00 after Fed officials remained cautious on any easing.

Against the Japanese Yen, the Dollar soared to 154.60 from 153.90 despite fresh intervention warnings from Masato Kanda, the country’s top currency diplomat. Kanda said the government stands ready to combat disorderly, speculative-driven foreign exchange moves.

Broad-based US Dollar strength weighed on the Euro and British Pound. The Euro (EUR/USD) eased to 1.0755 from 1.0770. On Monday, the shared currency hit a one-month high at 1.0812.

Sterling slid 0.4% to 1.2508 (1.2548) but remained near 4-week highs. The British Pound soared to an overnight high at 1.2571 before sliding to its New York close.

The Kiwi (NZD/USD) was little changed, settling at 0.6003 (0.6000). Last week the RBNZ signaled its intention to delay any shift toward monetary easing until 2025, steadying the Flightless Bird.

The Greenback edged modestly higher against the Asian and Emerging Market Currencies. USD/CNH (Dollar-Offshore Chinese Yuan) rallied to 7.2250 (7.1950). Against the Singapore Dollar, the Greenback (USD/SGD) climbed to 1.3545 from 1.3510 on Monday.

Bond yields fell. The US 10-year Treasury yield eased to 4.46% (4.51%). Germany’s 10-year Bund yield closed at 2.42%, down from 2.49%. The UK 10-year Gilt rate slumped to 4.12% (4.22%).

Wall Street stocks retreated to finish with modest gains after trading higher. The US S&P 500 settled at 5,190 after rallying above 5,200 to 5,203.7. The DOW settled at 38,877 (38,710).

Data released yesterday saw Germany’s Factory Orders in April fall to -0.4%, missing forecasts at 0.4%. UK Construction PMI climbed to 53 from 50.2 previously, beating estimates at 50.4.

• AUD/USD – the Aussie Battler eased to 0.6600 from 0.6620 against the overall firmer US Dollar. The RBA kept rates unchanged at 4.35% as was widely expected. It was the fourth straight meeting the RBA extended its pause. Overnight, the Aussie hit a high at 0.6645.

• USD/JPY – despite fresh intervention warnings from Japan’s top currency diplomat, Masato Kanda, the USD/JPY pair rallied to 154.60 from 153.90. Yield differentials between US and Japanese interest rates remained wide, weighing on the Yen.
• EUR/USD – the shared currency dipped modestly to 1.0755 from 1.0770 against the overall stronger US Dollar. Overnight, the Euro rose to an overnight high at 1.0787 before easing. The overnight low recorded for the EUR/USD pair was 1.0741.
• GBP/USD – Sterling slid against the broadly based stronger US Dollar to 1.2508 from 1.2548 previously. Overnight, Sterling soared to 1.2571 before easing in late New York. The overnight high traded for the British Pound was 1.2571.

On the lookout:

Today’s economic data calendar is light and kicks off with Japan’s April Stock Investment by foreigners (no f/c, previous as -JPY 492.4 billion – ACY Finlogix). There are no other data releases from Asia.

Germany kicks off Europe with its German March Industrial Production (m/m f/c -1.1% from 2.1% previously – ACY Finlogix). Italy follows with its March Retail Sales (m/m f/c 0.2% from 0.1%; y/y f/c -0.4% from 2.4% - ACY Finlogix). The US rounds up today’s releases with its March Wholesale Inventories (f/c -0.4% from -0/4% - FX Street).

Trading perspective:

After a soft finish last week, the US Dollar rebounded, rallying against most of its Rivals. The Dollar Index (DXY) climbed to 105.37 from 105.00. The catalyst was a muddled outlook for the Federal Reserve following recent central bank rhetoric.

Neil Kashkari said that the Fed may need to hold interest rates all year. Minneapolis Fed President Neel Kashkari said that he can’t rule that the next move from the US central bank will be a rate hike. New York Fed President John Williams said that interest rate decisions will be dependent on the incoming data. Thomas Barkin, Richmond Fed President expressed confidence that inflation will decline to 2% as the full effects of higher rates materialize.

Expect consolidation in Asian trade today with the US Dollar maintaining its strength against most Rivals.

• AUD/USD – the Aussie Dollar dipped to 0.6600 from 0.6620 against the broadly based stronger Greenback. Look for immediate support today at 0.6570 followed by 0.6540. On the topside, immediate resistance can be found at 0.6630 and 0.6660. Expect consolidation in the Aussie today, likely between 0.6570 and 0.6650. Preference remains to sell the Aussie on strength.
• USD/JPY – with the Dollar rebounding against the Japanese currency, expect intervention rhetoric from Japanese officials to pick up in Tokyo today. Immediate resistance lies at 155.00 and 155.50. Immediate support can be found at 154.20, 153.70 and 153.20. Look for another choppy trading day in USD/JPY, likely between 153.70-155.20. Tin helmets on, trade the range.
• EUR/USD – the shared currency dipped against the US Dollar to close at 1.0755. Immediate resistance lies at 1.0785 followed by 1.0815 and 1.0845. On the downside, look for immediate support at 1.0720 followed by 1.0690 and 1.0660. Look for the Euro to consolidate in Asia today, likely between 1.0720 and 1.0790. Prefer to sell Euro rallies.
• GBP/USD – Sterling slid under the weight of the broadly based stronger Greenback to 1.2508 from 1.2548 previously. On the day, look for immediate support at 1.2475 followed by 1.2445. On the topside, immediate resistance can be found at 1.2540, 1.2570 and 1.2600. Look for the British Pound to trade a likely range of 1.2450-1.2550.

Have a good Wednesday ahead all, happy trading.