RBA taking it easy

17 May, 2016

No major central bank decisions this week, but plenty of indications of their thinking with minutes from the FOMC, ECB and the RBA overnight from Australia. The rate cut earlier this month was not fully expected by the market, so it should not be a surprise that the minutes were suggesting that the RBA is taking a cautious approach to the outlook. Perhaps it is not surprising was that it was the “broad based softness in prices and costs” was the main factor behind the decision to cut rates to 1.75%. They also noted the impact of “supervisory measures” on the housing market, which had tightening lending standards and taken some of the heat from the housing market, reducing the risks of lowering rates. The Aussie jumped around 1% on the back of the release, brining it above the 2.5 month lows recorded yesterday on AUDUSD at 0.7237. The focus remains with New Zealand and Canada, the other commodity bloc currencies, as the next major central banks to cut rates, with New Zealand likely to cut rates early June. AUDNZD was also marking 2.5 month lows yesterday, but the policy backdrop does argue for a more sustained correction into June.

Sterling has been on a firmer footing for the past couple of sessions, something which could be challenged by today’s inflation data. The headline rate is seen steady at 0.5%, with core prices falling from 1.5% to 1.4%. PPI data is also seen at the same time, so volatility risks are increased. Sterling has 5 weeks to go to the ‘Brexit’ referendum in June, which still has the potential to weakness the currency should the polls continue to show only a slight margin for the ‘remain’ camp. US CPI data is also seen this afternoon. The dollar has settled into a range (dollar index) after the recent recovery from the early May lows. Meanwhile, ahead of the G7 meeting at the end of the week, the pressure is reduced on the Bank of Japan in terms of the strength of the yen vs. the USD, the yen 2.6% weaker vs. the dollar from the USDJPY lows.


Source link  
Market Sentiment Hinging On Progress In Brexit

The British parliament will vote on the Brexit agreement today at 18:00 GMT. In theory, this should be a simple vote, with a definite...

Market shows demand for yielding assets

The market shows demand for yielding assets, which in turn supports demand for the stocks and currencies of emerging markets. The main...

Yuan and Dollar as a weapon in trade wars

The US Nonfarm Payrolls on Friday could even be called boring: the report showed the preservation of a completely healthy labour market...


Disappointment with Fed and tariffs

Trump announced 10% tariffs on Chinese goods worth $300 billion since September 1, thus ending the US-China trade truce after disappointingly...

Fed pushes down stocks

Markets have started the week under pressure. Expectations that the Federal Reserve will cut interest rates by 50 points in July collapsed...

Gold updates new 6-years highs

Gold benefits from a combination of two factors: lower interest rates in debt markets and continuing hopes that the global economy...


Markets recede from the recent highs

A strong Nonfarm Payrolls caused pressure on the stock markets, reducing the chances of the interest rates lowering by the Fed in the upcoming months...

Gold resumes rally, pushing past $1400

Gold prices resumed a push higher on Monday, as flows into the precious metal continued on improved prospects for easier monetary policy from...

Gold rises as markets slip

Market caution continues to support gold. Quotes of this metal rose to $1337, repeatedly trying to push above this year highs at the 1340-1360 area...

  


Share it on:   or