No great surprise to see the RBA keep the cash rate steady overnight, but the Aussie managed a modest recovery as a result. As usual, the central bank still sees the Aussie as overvalued on a fundamental basis, especially in light of recent developments in commodity prices, but this is a long-held position which the market is now pretty much immune to. The other point to note is the further fall in crude oil prices. West Texas has pushed below the 80 level on a more sustained basis, whilst Brent is very close to trading at 4 year lows once again (currently just above 83.00). Naturally, this adds to the dis-inflationary impulse in the global economy in general, but also puts more money into the pockets of consumers.
Yesterday, sterling was the standout in holding its ground vs. the stronger dollar, in part thanks to the firmer than expected manufacturing PMI data. But the push above 1.60 on cable struggled to be sustained. For today, the currency will have one eye on the construction PMI data at 09:30 GMT. Otherwise, the main focus on the data front will be with US trade data at 13:30 GMT, with factory orders at 15:00 GMT. Note that jobs data is released in New Zealand overnight, with further gains in employment seen in Q3. Finally, note that the yen continues to be biased lower, with the initial resistance for USDJPY sitting just above the 114.00 level. The stock market is being buoyed by the potential for more share purchases from Japan’s main pension fund, which is in turn pushing the yen lower.
Further reading:
Bearish EUR/USD; Bullish USD/JPY – BofA Merrill
USD/CAD rising towards 5 year high as oil trades at highest in 3 years
