RBA Minutes discuss a cut
UK Labor data in line
Nikkei 0.24% Dax 0.73%
Oil $63/bbl
Gold $1284/oz.

Europe and Asia:
AUD RBA minutes hint at easing
GBP UK Wages 3.5% vs. 3.5%
EUR ZEW 5.5 vs. 8.5

North America:
USD Industrial Production 9:15

The RBA hinted at the prospect of a rate cut in the release of its April meeting minutes, sending Aussie lower in overnight trade in what was otherwise an uneventful Asian and early European dealing session.

The RBA minutes revealed that central is becoming concerned about the housing slowdown in the country and is uncertain if the recent job growth could offset the decline is wealth effect from housing losses. The central bank noted, “Members also discussed the scenario where inflation did not move any higher and unemployment trended up, noting that a decrease in the cash rate would likely be appropriate in these circumstances.”

This was the key line in the report and send Aussie lower through the .7150 level as traders surmised that RBA was preparing the market for a round of cuts to offset the sluggish global demand and temper the capital losses in the housing market. Some analysts suggested that the RBA may even cut rates as many as three times over the next year, although such a move would drastic given the current conditions.

For now, the focus will remain squarely on Thursday’s employment data which could make or break the pair going forward. Employment growth has been the bastion of last support for Aussie bulls, and if the job numbers begin to falter the market sentiment will quickly shift to a near 100% certainty of a rate cut which will likely push the Aussie towards the psychologically key .7000 barrier by the end of the week. For now, the bears will focus on running stops at the .7100 figure as the day proceeds.

Elsewhere, the euro took a tumble on weaker than expected ZEW release and reports that several ECB policymakers doubted the current economic projections and believed that growth would be even weaker than the already tepid 1.3% projections. The pair dipped below 1.1300 and remained pressured into the North American open.

In North America, another barren calendar day with only the bond and equity flows to drive trade. Volatility remains near record lows in FX and unless other asset classes make large moves, currencies are likely to remain subdued as get closer to Easter break in the markets.

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