Aussie Sold as RBA Cuts Rates, Euro Inflation Jump May Hurt Sentiment

2012-10-02 06:05:00 Ilya Spivak, Head Strategist, APAC

The Australian Dollar fell overnight as the RBA issued an interest rate cut. A jump in Eurozone PPI may dent risk appetite amid waning ECB stimulus hopes.

Talking Points

Australian Dollar Sold in Asia as RBA Cuts Rates on Global Slowdown Fears
Eurozone PPI Jump May Hurt Risk Appetite by Denting ECB Stimulus Hopes

The Australian Dollar underperformed overnight – down as much as 0.7 percent on average against its top counterparts – after the RBA opted to cut the benchmark interest rate by 25bps to 3.25 percent. Central bank Governor Glenn Stevens cited a softer outlook for the global economy as the primary driver behind opting for a policy stance that was “a little more accommodative”, singling out contracting activity in Europe and modest performance in the US. Perhaps most interestingly, the RBA chief notably tempered his heretofore rosy stance on China – the engine of Australia’s mining boom that has kept the economy resilient over recent years – saying “uncertainty about [its] near-term prospects is greater than it was some months ago.”

Looking ahead, the economic calendar is relatively tame. Eurozone PPI figures headline the docket, with expectations calling for wholesale inflation to jump to 2.6 percent in August after a modest 1.8 percent print it the prior month. The outcome may carry near-term negative implications for risk appetite by way of denting (admittedly slim) hopes for ECB stimulus ahead of this week’s rate decision. With that said, traders’ priced-in expectations are firmly skewed toward a status-quo outcome according to data compiled by Credit Suisse, meaning a reading that reinforces such a scenario is unlikely to stir much in terms of directional momentum.

Asia Session: What Happened

GMT	CCY	EVENT	ACT	EXP	PREV
23:50	JPY	Monetary Base (YoY) (SEP)	9.0%	-	6.5%
0:00	AUD	RPData-Rismark House Px Actual (SEP)	1.4%	-	0.0%
1:00	NZD	ANZ Commodity Price (SEP)	3.5%	-	0.5%
1:30	JPY	Labor Cash Earnings (YoY) (AUG)	0.2%	-1.0%	-1.6% (R-)
4:30	AUD	Reserve Bank of Australia Rate Decision (OCT 2)	3.25%	3.50%	3.50%

Euro Session: What to Expect

GMT	CCY	EVENT	EXP/ACT	PREV	IMPACT
6:00	GBP	Nationwide House Prices s.a. (MoM) (SEP)	-0.4% (A)	1.1%	Medium
6:00	GBP	Nationwide House Prices n.s.a. (YoY) (SEP)	-1.4% (A)	-0.7%	Medium
6:30	AUD	RBA Commodity Price Index (SEP)	90.1 (A)	89.2	Low
6:30	AUD	RBA Commodity Index SDR (YoY) (SEP)	-14.9% (A)	-14.7%	Low
8:30	GBP	PMI Construction (SEP)	49.9	49.0	Medium
9:00	EUR	Euro-Zone PPI (MoM) (AUG)	0.6%	0.4%	Medium
9:00	EUR	Euro-Zone PPI (YoY) (AUG)	2.6%	1.8%	Medium