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Aussie Dollar May Extend RBA-Linked Gains as Risk Appetite Firms

Aussie Dollar May Extend RBA-Linked Gains as Risk Appetite Firms

Ilya Spivak, Head Strategist, APAC

Talking Points:

  • Australian Dollar soared after RBA signals shift back to neutral policy stance
  • British Pound briefly spiked higher vs. majors after alleged “fat finger” error
  • Upside revision on Eurozone 1Q GDP may boost risk appetite, commodity FX

The Australian Dollar soared against its major counterparts after the RBA appeared to settle back into wait-and-see mode following last month’s surprise interest rate cut. The central bank kept its baseline cash rate unchanged as expected at 1.75 percent following today’s policy meeting but the accompanying statement seemed to strike a less dovish tone than previously.

In the document, Governor Glenn Stevens argued that the existing policy stance is “consistent with sustainable growth in the economy and inflation returning to target over time,” pouring cold water on speculation about a sustained easing cycle. The Aussie rose alongside front-end bond yields, underscoring the anti-dovish perception of the RBA’s updated stance.

The British Pound mysteriously surged against all of its major counterparts. A clear-cut trigger was not readily apparent, with the newswires citing a so-called “fat finger” error on one of the major electronic platforms as the culprit. The erroneous quote allegedly triggered stop-lossesintraday, fueling a spike. Needless to say, it is nearly impossible to confirm the accuracy of such theories.

Looking ahead, a relatively quiet economic calendar in European and US trading hours is headlined by a revised set of first-quarter Eurozone GDP figures. News-flow out of the single-currency area has increasingly improved relative to consensus forecasts over the past three months, opening the door for an upside adjustment. Such a result may push back against global slowdown fears and boost risk appetite, offering a lift to commodity-bloc FX while punishing the anti-risk Japanese Yen.

Asia Session

GMTCCYEVENTACTEXPPREV
22:00NZDANZ Truckometer Heavy (MoM) (MAY)-1.7%--2.4%
23:01GBPBRC Sales Like-For-Like (YoY) (MAY)0.5%0.3%-0.9%
23:30AUDAiG Perf of Construction Index (MAY)46.7-50.8
23:30AUDWeekly Consumer Confidence Index (JUN 5)116.8-113.2
23:50JPYOfficial Reserve Assets (MAY)$1254.0b-$1262.5b
04:30AUDRBA Cash Rate Target (JUN 7)1.75%1.75%1.75%
05:00JPYLeading Index CI (APR P)100.5100.799.3
05:00JPYCoincident Index (APR P)112.2112.7111.1

European Session

GMTCCYEVENTEXPPREVIMPACT
06:00EURGerman Industrial Production (MoM) (APR)0.7%-1.3%Medium
06:00EURGerman Industrial Production (YoY) (APR)1.0%0.3%Medium
06:30AUDForeign Reserves (A$) (MAY)-65.7bLow
07:00CHFForeign Currency Reserves (MAY)-587.6bLow
07:30GBPHalifax House Prices (MoM) (MAY)0.3%-0.8%Medium
07:30GBPHalifax House Price (3Mths/Year) (MAY)8.9%9.2%Medium
09:00EUREurozone GDP SA (QoQ) (1Q F)0.5%0.5%High
09:00EUREurozone GDP SA (YoY) (1Q F)1.5%1.5%High
09:00EUREurozone Gross Fix Cap (QoQ) (1Q)1.1%1.3%Low
09:00EUREurozone Gov’t Expenditure (QoQ) (1Q)0.4%0.6%Low
09:00EUREurozone Household Consumption (QoQ) (1Q)0.5%0.2%Low
11:00EURECB's Makuch Speaks on Economic Forecast--Low

Critical Levels

CCYSupp 3Supp 2Supp 1Pivot PointRes 1Res 2Res 3
EUR/USD1.12241.12911.13231.13581.13901.14251.1492
GBP/USD1.40891.42651.43541.44411.45301.46171.4793

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

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