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Forex: Australian Dollar Soars as RBA Withholds Rate Cut Signal

By , Currency Strategist
03 September 2013 07:23 GMT

Talking Points

  • Australian Dollar Soars as RBA Holds Off on Signaling Further Rate Cuts
  • NZ Dollar Rallied, Japanese Yen Fell as Risk Appetite Firmed in Asian Trade
  • US Dollar to Gauge ISM Manufacturing Data in Terms of Fed “Taper” Bets

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The Australian Dollar rallied as expected after the Reserve Bank of Australia opted to keep interest rates unchanged at 2.50 percent without signaling further easing in the pipeline over the coming months. In the statement accompanying the announcement, RBA Governor Glenn Stevens said the current setting of monetary policy “remained appropriate”.

Stevens went on to add that the effects of monetary stimulus since 2011 – including rate reductions over recent months – will continue to emerge over time. That suggested that the RBA expects monetary conditions to ease further as past policy actions filter into the broader economy, limiting scope for additional rate cuts in the near term. We remain long AUDUSD.

Meanwhile, the New Zealand Dollar advanced and the Japanese Yen declined as stocks rallied in Asian trade. The former currency found support as the risk-on mood drove demand for higher-returning assets while the latter fell on a pickup in capital flows into carry trades funded in terms of the perennially low-yielding Japanese unit. The MSCI Asia Pacific regional benchmark equities index rose 1.4 percent.

A relatively quiet economic calendar in European trading hours is likely to see investors looking ahead toward the US data docket, where Augusts’ US ISM Manufacturing gauge is in focus. Economists’ forecasts point to a slight slowdown in factory-sector activity after the measure hit a 25-month high in July.

Markets are likely to interpret the release in terms of its implications for Federal Reserve monetary policy as speculation surrounding the central bank’s intent to begin “tapering” QE asset purchases remains in focus. With that in mind, a soft print is likely to be seen as limiting the scope for stimulus reduction and weigh on the US Dollar. An upside surprise can be expected to yield the opposite result.

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Asia Session:

GMT

CCY

EVENT

ACT

EXP

PREV

23:01

GBP

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

1.8%

2.4%

2.2%

23:50

JPY

Monetary Base (YoY) (AUG)

42.0%

-

38.0%

23:50

JPY

Monetary Base - End of Period (¥)(AUG)

177.0T

-

173.3T

1:00

NZD

ANZ Commodity Price (AUG)

0.7%

-

0.6%

1:00

CNY

Non-manufacturing PMI (AUG)

53.9

-

54.1

1:30

AUD

Current Account Balance (A$) (2Q)

-9.4B

-8.5B

-8.7B

1:30

AUD

Net Exports of GDP (2Q)

0.0%

0.1%

1.0%

1:30

JPY

Labor Cash Earnings (YoY)

0.4%

-

0.6%

1:30

AUD

Retail Sales s.a. (MoM) (JUL)

0.1%

0.4%

0.0%

4:30

AUD

Reserve Bank of Australia Rate Decision

2.50%

2.50%

2.50%

Euro Session:

GMT

CCY

EVENT

EXP/ACT

PREV

IMPACT

5:45

CHF

Gross Domestic Product (QoQ) (2Q)

0.5% (A)

0.6%

Medium

5:45

CHF

Gross Domestic Product (YoY) (2Q)

2.5% (A)

1.2%

Medium

8:30

GBP

PMI Construction (AUG)

56.9

57.0

Medium

9:00

EUR

Euro-Zone PPI (MoM) (JUL)

0.1%

0.0%

Low

9:00

EUR

Euro-Zone PPI (YoY) (JUL)

0.1%

0.3%

Low

Critical Levels:

CCY

SUPP 3

SUPP 2

SUPP 1

Pivot Point

RES 1

RES 2

RES 3

EURUSD

1.3100

1.3152

1.3172

1.3204

1.3224

1.3256

1.3308

GBPUSD

1.5363

1.5455

1.5499

1.5547

1.5591

1.5639

1.5731

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

To contact Ilya, email ispivak@dailyfx.com. Follow Ilya on Twitter at @IlyaSpivak

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03 September 2013 07:23 GMT