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Dollar Index Outlook Bullish Ahead of  RBA, Chinese News

Dollar Index Outlook Bullish Ahead of RBA, Chinese News

Renee Mu, David Rodriguez,

OPEN

HIGH

LOW

LAST

PRICE

CHANGE %

USDOLLAR Index

10492.27

10519.08

10485.78

10488.93

-0.00515

EURUSD Curncy

1.3015

1.3031

1.2982

1.3003

-0.14591

GBPUSD Curncy

1.5026

1.5092

1.5

1.5088

0.332491

USDJPY Curncy

93.59

93.73

93.17

93.32

-0.28849

AUDUSD Curncy

1.0193

1.0206

1.0115

1.016

-0.42145

The Dow Jones FXCM Dollar Index dropped slightly on a noteworthy Sterling rebound, while the Australian dollar tumbled to its lowest level in eight months after China announced new measures to cool real estate prices. The next major focus for the Dollar Index is still on the Aussie, as the Reserve Bank of Australia is scheduled to announce its benchmark interest rate decision early Tuesday morning.

The Australian central bank is likely to leave rates unchanged at 3.00 percent, despite the fact that rates have been cut by 1.75 percentage points since November 2011. Recent data shows that Australia fundamental has been little changed in past weeks with continuous weakness in building approvals, retail sales and employment. In order to stimulate borrowing and boost the domestic economy, the RBA is likely to hold the target rate at the current low level for a longer period. If necessary, the bank could even implement further cuts to ease the pressure on the economy from a strong currency.

China, Australia’s biggest export partner, saw a slowdown in manufacturing expansion with declines in both HSBC Purchasing Managers’ Index and Factory Output. Such bearish signals may weigh further on the Australian Dollar, while the upcoming legislative meeting from China’s National People’s Congress may likewise weigh on outlook for future Chinese economic expansion. The next governor of People’s Bank of China, succeeding Zhou Xiaochuan, will also be announced during the meeting. Mr. Zhou has been a key architect of financial reform in the world’s second-largest economy. Whether his successor will continue the monetary policy where China breaks away from its traditional development mode and moves on a sustainable track will have a great impact on the banking and financial system in both short term and the long run.

The key question remains whether the Chinese government could carry out other wave of restrictive monetary policy to fight the upward trend in inflation. As a consequence, the market may become worried about the prospects of global economic growth and turn to the safe-haven currency, the U.S. dollar. Tomorrow, traders may look to the Chinese HSBC Services PMI and Australia Retail Sales to guide the short-time moves in pair.

Economic Calendar

Date

Time

Currency

Event

Importance

Forecast

Previous

Tue

Mar 5

01:45

Dollar_Index_Outlook_Bullish_Ahead_of__RBA_Chinese_News_body_cny.png, Dollar Index Outlook Bullish Ahead of  RBA, Chinese News

HSBC Service PMI(FEB)

Medium

54

03:30

Dollar_Index_Outlook_Bullish_Ahead_of__RBA_Chinese_News_body_aud.png, Dollar Index Outlook Bullish Ahead of  RBA, Chinese News

AUD Reserve Bank of Australia Rate Decision(MAR 5)

HIgh

3.00%

3.00%

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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