Australian rates on hold for a while

Today's Highlights

• Australian rates on hold for a while

• Potential US base rate movement keeps USD on back foot

• Italian referendum action appears to be over for now

Current Market Overview

The Italian referendum caused a flurry of euro selling and market turbulence, but it has all but faded away now. That isn’t the end of the story though. Two banks; Banca Monte dei Paschi di Sienna and UniCredit are, between them, in need of €18 billion in extra funds and need that money by early in 2017. There is a good chance they will get what they need, though, because while the EU wants to look tough and says it is ready to let banks fail, what would that say about the EU at a time when anti-EU sentiment is rife? Hence, the Euro has recovered somewhat. We will get the final figure for the EU’s Quarter Three economic growth this morning and it is likely it will confirm the 0.3% growth seen in the previous quarter. It’s unlikely to change the value of the Euro significantly.
 
The Reserve Bank of Australia met overnight (GMT) to agree to keep their base rate on hold at 1.5%. The tone of their message was that they are likely to sit on their hands for a while now, as they watch events unfold in both the domestic and global economies. The Australian Dollar weakened on the announcement and the GBP-AUD rate seems set to reach the 1.73 resistance sometime soon. 
 
US data showed an upturn in America’s service sector. That, plus a fall in oil prices ought to have strengthened the USD, but nervousness ahead of next week’s Federal Reserve Meeting is keeping the USD twitchy. There is a lot of brashness around the expected US interest rate hike on the 14th but not much in the way of ‘money where your mouth is’ activity. The Euro-USD rate is up, as is the GBP-USD rate. This afternoon brings US Productivity and Labour costs data as well as the latest Durable Goods figures. These latter numbers are forecast to be quite poor, so further USD weakness is a possibility.
 
Other than these items, it is a rather quiet day in the forex markets. That doesn’t mean things won’t be lively, but we’ll have to rely on daft political comments for that. It’s pretty much guaranteed then.