AUD shrugs off the RBA

Australian Dollar:

In a decision which surprised very few yesterday the Reserve Bank of Australia kept interest rates on hold at 2.5 percent. Despite lingering concerns over the growth outlook amid rising unemployment Policy Makers reiterated that record low-rates will be here for some time to come. Whilst initially causing the Australian dollar to tumble to an intraday low of 0.8908 following comments by Glenn Stevens that the Aussie “remains high by historical standards” improved risk flows over the past 24 hours have in general provided a boost for the domestic currency. Opening this morning marginally stronger at a rate of 0.8942 there remains a string of key risk events on the horizon today lead by figures which are expected to show Australia’s economy grew by 0.7 percent last quarter.

• We expect a range today of 0.8910 – 0.8980

New Zealand Dollar

Demand for the New Zealand dollar has risen overnight amid improved confidence that the tensions between Russia and the Ukraine were easing. Following comments from Russian President Vladimir Putin that the Ukraine crisis won’t escalate immediately the New Zealand dollar traded from an earlier low of 0.8350 when valued against its US Counterpart up to an overnight high of 0.8399. With broader risk flows turning on their head in favour of the higher yielding asset overnight a lack of domestic data flows today should see conditions remain relatively choppy. Stronger this morning the Kiwi currently buys 83.86 US Cents.  

• We expect a range today of 0.8350 – 0.8420

Great British Pound:

In figures which will do little for those wanting higher interest rates sooner UK Construction growth slowed more than forecast in February. With extremely wet weather hampering building activity investors haven’t read too much into the poor result given their remains strong demand for new projects. In what proved to be a generally positive session for the Great British Pound improved news feeds from Russia helped the Sterling reach an overnight high of 1.6715. Whilst stronger against both the Greenback (1.6671) and the Aussie (1.8643) this morning the Sterling is lower against the Kiwi (1.9875)

• We expect a range today of 1.8600 – 1.8680

Majors:

In his first public statement since Ukraine said its Crimean peninsula had been taken over by Russian forces, Russian president Vladimir Putin said that whilst he reserved the right to use force to defend ethnic Russians there remains no such necessity at present. Sidelining fears of a broader confrontation the Greenback has been a major benefactor overnight with the Japanese Yen being sold off the back of improved risk flows. Despite the limited economic impact of a geopolitical conflict currency markets reliance on a stable risk backdrop has been there for all to see during the early parts of this week. With economic happenings across the US and broader Europe heating up this evening the EUR/USD is virtually unchanged this morning at 1.3734 whilst the USD/JPY is higher at 102.235.   

Data releases

• AUD: GDP q/q
• NZD: Trade Balance, Visitor Arrivals m/m
• JPY: No data today
• GBP: Services PMI
• EUR: Spanish Services PMI, Italian Services PMI, Final Services PMI
• USD: ADP Non-Farm Employment Change, Final Services PMI, ISM Non-Manufacturing PMI Beige Book