Eyes on the RBA ahead of today's interest rate decision

Australian Dollar:

The Australian dollar has remained firm above the 92 US cents mark overnight as markets prepare for The Reserve Banks interest rate decision and monetary policy statement at 2:30pm AEST this afternoon. With investors expecting no change to the benchmark cash rate it’s widely tipped that Glen Stevens will remain relatively upbeat as he did during a speech in Hong Kong last week. Despite the many challenges, including a booming housing market, stiffer inflation and a strong dollar which face policy makers, it has surprised many, just how resilient domestic data prints have been in absorbing these pressures. Having traded in a 24 hour range of 0.9217 – 0.9276 when valued against its US Counterpart the Australian dollar is currently testing the upper limits of this band stronger by 40 basis this morning at 0.9273.

• We expect a range today of 0.9240 – 0.9310

New Zealand Dollar:

Despite claims by the International Monetary Fund that the New Zealand dollar remains overvalued by between 5 and 15 percent, during its annual check-up on the health of New Zealand’s economy, it did concede many factors including favourable terms of trade, a favourable growth outlook and higher relative interest rates were all contributing to its strong value. It what’s set to be a longer-term battle for the RBNZ, the need for higher rates domestically and a lower dollar may require a more innovative policy mix. In currency moves overnight the New Zealand dollar has been well supported by comments from US Fed Chair Janet Yellen who stated the world’s largest economy will require ongoing monetary support. Bouncing from lows of 0.8640 the NZD is marginally stronger this morning as it buys 86.76 US Cents.

• We expect a range today of 0.8640 – 0.8700

Great British Pound:

The Great British Pound has advanced by 0.2 percent against its US Counterpart overnight before a string economic reports this week which are expected to show signs of an ongoing recovery throughout the UK. Reaching an overnight high of 1.6683 investors are already looking towards reports on Manufacturing, retail, services and credit growth due for release over the coming days.  Stronger this morning versus the dollar at 1.6668 the Great British Pound has been unable to hold gains against both the Aussie (1.7972) and the Kiwi (1.9207) which both open lower.

• We expect a range today of 1.7930 – 1.8000

Majors:

With tensions easing in the Ukraine US Stocks advanced overnight after US Federal Reserve Chair Janet Yellen stated the extraordinary efforts of policy makers to spur growth in the world’s largest economy will still be needed for some time. Providing an opportunity to calm the expectations surrounding future interest rate rises following previous comments that rates would rise roughly six months after quantitative easing was concluded the monetary policy story remains an all-important one in determining the strength of the US dollar. In currency moves overnight the Greenback strengthened considerably against the Japanese Yen stronger this morning at 103.178 whilst the Euro is also higher at 1.3774. On the outlook today the first major hurdle for investors come in the form of Manufacturing PMI from China followed by a similar Manufacturing number in the US this evening.  

Data releases

• AUD: Cash Rate, RBA Rate Statement
• NZD: No data today
• JPY: Tankan Manufacturing Index, Tankan Non-Manufacturing Index
• GBP: Manufacturing PMI
• EUR: Unemployment Rate, ECOFIN Meetings
• USD: ISM Manufacturing PMI