Asian Session Forex Recap – June 2, 2015

  • RBA kept interest rates on hold at 2.00% as expected
  • RBA Gov Stevens: Further AUD depreciation is needed
  • RBA statement: Monetary policy needs to be accommodative
  • Australia’s current account deficit widened from 10.2B AUD to 10.7B AUD
  • Japanese average cash earnings up 0.9% in April vs. projected 0.4% uptick
  • Spanish and German unemployment change figures due today
  • U.K. construction PMI to climb from 54.2 to 55.1 in May?
  • Euro zone flash CPI estimates up for release

Nope, no surprises from the RBA this time! The Australian central bank decided to sit on its hands during today’s monetary policy statement, keeping interest rates on hold at 2.00% as expected. Of course RBA Governor Stevens didn’t pass up the opportunity to jawbone the Aussie, citing that further currency depreciation is needed and that monetary policy needs to remain accommodative in order to keep growth and inflation supported.

The official RBA statement also indicated that the economy is growing below trend for the time being and that the downturn in private capital expenditure could keep domestic demand weak. Nonetheless, Aussie pairs popped higher upon finding out that rates will stay unchanged for now, ignoring the current account balance which showed a wider deficit of 10.7 billion AUD.

AUD/USD is up 71 pips (+0.93%) after testing support at the .7600 handle and AUD/JPY is 81 pips higher (+0.85%) and has reached a high of 95.75. The Aussie also advanced against its European counterparts, with EUR/AUD looking at a 120-pip loss (-0.84%) and GBP/AUD declining by 171 pips (-0.84%).

In Japan, average cash earnings indicated a stronger than expected 0.9% annualized increase for April, outpacing the consensus of a 0.4% uptick. However, the previous month’s figure was downgraded from an initially reported 0.1% gain to a flat reading.

USD/JPY was able to test the 125.00 major psychological resistance before retreating to 124.65 (-0.08%), EUR/JPY is up 12 pips (+0.07%) and is testing the ceiling at the 136.50 minor psychological mark, and GBP/JPY is holding steady at the 189.50 area with a small 4-pip gain (+0.03%).

Whether the pound can be able to hold on to its current levels or not remains to be seen, as the U.K. is set to release its construction PMI today. The reading is slated to climb from 54.2 to 55.1 in May, which would indicate a pickup in industry expansion and possibly allow the currency’s rallies to gain more traction. However, another weaker than expected result like its manufacturing PMI yesterday might lead to more losses for the pound.

Forex traders could also zoom in on the jobs reports from Germany and Spain, which might show further declines in unemployment. Also due from the euro zone are its flash CPI estimates for May, which could indicate small improvements in both the headline and core figure. Stronger than expected readings could allow the shared currency to carry on with its ascent, but this could be overshadowed by any updates regarding the Greek debt situation. Better watch out for those!

U.S. Session Recap

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