Forex Today: RBA’s Lowe drives Aussie lower; German IFO, ECB in focus

Cautious optimism prevailed in Thursday’s Asian trading, as markets were caught up between stimulus hopes by key central banks and the latest report on the North Korean missile launch. The safe-haven Yen traded on the front foot almost throughout the session, as USD/JPY defended the 108 handle. Gold prices held steady above the 1420 level amid a broadly subdued US dollar, with the further upside limited by higher Asian equities.

The Antipodeans were on the defensive, with the Aussie having slipped into fresh 2-week lows of 0.6965 after the Reserve Bank of Australia (RBA) Governor Lowe said that it's reasonable' to expect lower rates for longer. The Kiwi followed suit and gave up the 0.67 handle, down -0.10% so far. The Loonie remained trapped in its recent trading range below 1.3150 amid a pullback in oil prices from multi-day troughs.  

Meanwhile, the EUR/USD pair consolidated near two-month lows of 1.1126 ahead of the key European Central Bank (ECB) monetary policy decision. The Cable stalled its recovery and turned lower amid UK Cabinet shuffle and Brexit uncertainty.    

Main Topics in Asia

North Korea fired unidentified projectile from around Wonsan – Yonhap

US assesses North Korea has launched at least one short range projectile – CNN

North Korea fires two 'unidentified projectiles' - Sky News

Japan's Abe says North Korea launch poses no threat on Japanese security - Kyodo

Japan’s DefenceMin Iwaya: North Korean projectile launch 'very regrettable' - Jiji

Jacob Rees Mogg appointed as UK leader of the House of Commons

Gold holds the rising support line having been capped by 2.618% Fibo extension

WTI bulls holding the fort in the $56 handle on rising support line

Fed unlikely to start a full-on easing cycle - Goldman Sachs

S. Korean PM warns Japan should not further worsen trade spat over export curbs - Yonhap

Asian stocks rise on stimulus hopes

RBA’s Lowe: Prepared to ease policy further if demand disappoints, Aussie refreshes 2-week lows

RBA’s Lowe: Uncertain if demand will be strong enough, if not will need further stimulus

RBA’s Lowe: Global disputes on trade, technology making businesses reluctant to invest

Key Focus Ahead

Markets eagerly await the European Central Bank’s (ECB) monetary policy decision due to be announced this Thursday at 1145 GMT, with the central bank widely expected to deliver a dovish message suggesting a rate cut and/ or a QE restart from September. The presser following the policy statement, at 1230 GMT, will be closely eyed for President Draghi’s take on the economic outlook and fresh hints on the forward guidance.

Ahead of the ECB events, the shared currency will take cues from the German IFO business survey, with the headline Business Climate Index likely to drop to 97.1 in July amid sluggish Eurozone’s manufacturing sector and trade concerns. Meanwhile, the GBP traders will watch for any incentives from the UK CBI July Distributive Trade Survey – Realized (MoM).

The NA session sees the ECB Presser alongside the releases of the US Durable Goods Orders, Goods Trade Balance and Jobless Claims data at 1230 GMT. Despite the macro releases, the main event risk for today remains the ECB policy decision that is likely to drive the fx space ahead of next week’s FOMC monetary policy outcome.  

EUR/USD logs four-day losing streak ahead of ECB

Dovish ECB expectations keep the EUR on the back foot. The markets may have priced in a September rate cut. The EUR could take a beating and drop to 1.1000 if the ECB boosts prospects of aggressive rate cuts.

GBP/USD refrains from crossing 21-day EMA amid UK cabinet overhaul

With the pro-Brexiteers holding key UK positions under the new PM, GBP/USD refrains from extending previous gains while heading south pre-London open on Thursday.

ECB: Dovish risks prevail, EUR/USD to slip into fresh ranges - TDS

Analysts at TD Securities (TDS) expect the European Central Bank (ECB) to deliver a dovish message, which could send the EUR/USD pair to fresh yearly lows.

SNB to dive deeper into negative rates

Investors expect the Swiss National Banks (SNB) to cut its deeply negative interest rates in response to an increasingly expansive mood at the European Central Bank (ECB).