Today's Highlights
Reserve bank of Australia leave rates on hold
Euro area PMI's likely to weigh on the single currency
UK service sector PMI the focus this morning
FX Market Overview
Overnight the Reserve bank of Australia unsurprisingly left interest rates on hold at 2.5% for another month. Governor Stevens noted that the most prudent course is likely to be a period of stability with growth to be a little below trend over the year ahead. The Central bank looked past the recent rise in inflation stating that wage growth should keep inflation consistent with its target over the next couple of years. They also reiterated that the exchange rate was high by historical standards. Thursday's unemployment report is likely to be the main driver of the Australian dollar in the short term.
The Euro will be in focus this morning with release of service sector PMI's from around the Eurozone. There are unlikely to be significant revisions which along with an expected fall in retail sales may weigh on the single currency. Investors are concerned over the lack of growth momentum which will only be exacerbated by the geo-political tensions in Russia and the Ukraine. The euro will remain under pressure leading into this week's ECB policy meeting where unconventional measures , although probably too early to be implemented , will surely be discussed.
Construction PMI in the UK fell to 62.4 from 62.6 yesterday. A number above 50 denotes expansion in the sector so this was obviously a strong reading. House building is now accelerating at its highest pace in 11 years. This was a relief after last week's disappointing manufacturing data. This morning brings the service sector PMI which is closely watched as the service industry accounts for over 60% of the UK economy. A reading of around 58.0 is expected and another disappointment could see the Pound make new lows. The divergent monetary policy expectations between the UK and Europe should still see the Pound eventually gain versus the Euro but in the short term some consolidation may be in order.
Trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
Recommended Content
Editors’ Picks
EUR/USD stays near 1.0750 following Monday's indecisive action
EUR/USD continues to fluctuate in a tight channel at around 1.0750 after posting small gains on Monday. Disappointing Factory Orders data from Germany limits the Euro's gains as investors keep a close eye on comments from central bankers.
AUD/USD drops below 0.6600 after RBA policy announcements
AUD/USD stays under bearish pressure and trades deep in negative territory slightly below 0.6600. The RBA left the policy settings unchanged as expected but Governor Bullock said that there was no necessity to further tighten the policy.
Gold price turns red amid the renewed US dollar demand
Gold price trades in negative territory on Tuesday amid the renewed USD demand. A downbeat US jobs data for April prompted speculation of potential rate cuts by the Fed in the coming months.
Bitcoin miner Marathon Digital stock gains ground after listing by S&P Global
Following Bitcoin miner Marathon Digital's inclusion as an upcoming member of the S&P SmallCap 600, the company's stock received an 18% boost, accompanied by an $800 million rise in market cap.
The impact of economic indicators and global dynamics on the US Dollar
Recent labor market data suggest a cooling economy. The disappointing job creation and rising unemployment hint at a slackening demand for labor, which, coupled with subdued wage growth, could signal a slower economic trajectory.