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Forex Analysis: Euro Eyes EU FinMin Summit, Aussie Gains on RBA Bets

By , Currency Strategist
04 December 2012 10:05 GMT

The Euro is looking for further progress at a summit of EU finance ministers to extend its rally while the Aussie gains as the RBA downplays rate cut outlook.

Talking Points

  • Euro Looks for Bank Regulation Deal at EU Summit to Extend Rebound
  • Australian Dollar Gains as RBA Pours Cold Water on 2013 Rate Cut Bets

All eyes are on a meeting of EU finance ministers in European trading hours, where policymakers are due to focus on the issue of a single bank supervisor. Leaders of the common market agreed in June to set this as a precondition to allowing the EFSF/ESM bailout facilities to recapitalize regional banks directly without funneling funds through the governments of member states (which otherwise increases sovereign debt levels). Progress on this front is likely to be viewed favorably by the Euro as well as risk appetite at large, and vice versa.

The Australian Dollar outperformed in overnight trade, rising against all of its leading counterparts despite a decision to cut interest rates to 3 percent by the RBA. The reduction was widely expected, with data from Credit Suisse suggesting markets were pricing in the probability of a 25bps reduction at over 90 percent. This turned forex traders’ attention away from the change in the lending rate itself and toward guidance for future policy. RBA Governor Glenn Stevens projected no urgency in continuing the easing cycle, saying the effects of past efforts are yet to be felt in the overall economy. This was perceived as denting the likelihood of further rate cuts in the near term, sending the Aussie higher.

Asia Session: What Happened

GMT

CCY

EVENT

ACT

EXP

PREV

23:50

JPY

Monetary Base (YoY) (NOV)

5.0%

-

10.8%

0:00

NZD

ANZ Commodity Price (NOV)

1.0%

-

1.4%

0:01

GBP

BRC Sales Like-For-Like (YoY) (NOV)

0.4%

0.9%

-0.1%

0:30

AUD

Building Approvals (MoM) (NOV)

-7.6%

-1.6%

9.5%

0:30

AUD

Current Account Balance (A$) (3Q)

-14900M

-14550M

-12369M

0:30

AUD

Current Account Balance (3Q)

0.1

0

0.3

0:30

AUD

Building Approvals (YoY) (OCT)

14.50%

20.2%

14.3%

1:30

JPY

Labor Cash Earnings (YoY) (OCT)

0.2%

-

-0.5%

3:30

AUD

Reserve Bank of Australia Rate Decision

3.00%

3.00%

3.25%

Euro Session: What to Expect

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

8:00

EUR

EU-27 Finance Ministers Meet in Brussels

-

-

High

9:30

GBP

PMI Construction (NOV)

49.3 (A)

50.9

Medium

10:00

EUR

Euro-zone PPI (YoY) (OCT)

2.6% (A)

2.7%

Medium

10:00

EUR

Euro-zone PPI (MoM) (OCT)

0.1% (A)

0.2%

Medium

Critical Levels

CCY

SUPPORT

RESISTANCE

EURUSD

1.2992

1.3137

GBPUSD

1.6023

1.6184

--- Written by Ilya Spivak, Currency Strategist for Dailyfx.com

To contact Ilya, e-mail ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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04 December 2012 10:05 GMT