RBA Stability Review Fails to Shift Investor Sentiment

Australian Dollar:

The Australian Dollar held firmly above 0.7830 throughout trade yesterday however struggled on approaches to 0.79 as investors looked to sell into rallies. The Reserve Bank’s Financial Stability Review offered little new insight into the Central Bank’s upcoming policy decision and was largely brushed over by traders with 60% of the market still pricing in a 25 basis point reduction at next month’s policy meeting. While no new policy announcements were proffered the RBA did highlight concerns surrounding the conflicting policy decisions needed to combat the sluggish pace of growth and a burgeoning property market. It seems the Board is content in watching events unfold before playing another hand as the effectiveness of monetary policy adjustments is diminished in a global environment of easing. Attentions now turn to US GDP and Fed Chair Janet Yellen for direction into the weekend.

• We expect a range today of 0.7730 - 0.7940

New Zealand Dollar:

Much like its trans-Tasman counterpart the New Zealand dollar managed to maintain much of the week’s earlier gains touching an intraday high of 0.7691. Despite a softer than anticipated Trade Balance read the local unit found support in USD weakness and edged higher throughout Australasian trade as the yield play adds sustenance to the commodity currencies rally. Profit taking saw the NZD turn lower through the European and North American session and the Kiwi opens this morning buying 0.7605 US cents.  

• We expect a range today of 0.7490 - 0.7690

Great British Pound:

The Great British Pound struggled to mount any meaningful rally throughout trade on Wednesday as investors recovered from the hangover that was Tuesday’s 0% inflation read. The Sterling was sold off heavily in response to the annualised CPI report and investors appear reluctant to support any relief rally while the monetary policy outlook is expected to remain neutral at best. Attentions now turn to retail sales and the FPC statement for direction through Thursday as markets look for signs the economic recovery is on course.   

• We expect a range today of 1.8850 – 1.9150 

Majors:

The Greenback edged lower again Wednesday as weaker than anticipated Core Durable Goods orders heightened concerns first quarter growth forecast would continue to slide. The soft read is just another indicator that growth has slowed sharply in the first three months of the year and has given investors reason to short USD positions. As optimism builds within Europe after Tuesday’s strong PMI print and a robust German Business Confidence report investors looked to buy back into the 19 nation currency union. Touching intraday highs of 1.1010 the Euro edged lower to finish the session as resistance forms and speculators sell into rallies above 1.0990. Attentions now turn to Unemployment claims and FOMC Member Lockhart for direction into Friday’s GDP report. Investors are reacting now on a day to day basis adjusting positions on comments and data set that could shorten or extend the timeline surrounding a US rate adjustment. While the bearish turn in Greenback fortunes seems to be easing there are still calls the worlds base currency is overvalued and poised for another downward correction as market expectations draw level with Fed objectives.

Data releases

• AUD: No Data
• NZD: No Data
• JPY: No Data
• GBP: Retail Sales, FPC (Financial Policy Committee) Statement and CBI Realised Sales
• EUR: GfK German Consumer Climate, M3 Money Supply and Private Loans
• USD: Unemployment Claims, Flash Services PMI and FOMC Member Lockhart Speaks