Asian Session Forex Recap – May 3, 2016

  • Japan’s markets closed for Constitution Day holiday
  • Australia’s building permits up by 3.7% vs. 1.8% decline, 2.9% growth in February
  • China’s Caixin manufacturing PMI down from 48.7 to 49.4 vs. 49.8 expected
  • RBA cuts rates from 2.0% to 1.75%

Japan’s markets may be out on a holiday, but the RBA provided the opportunity for forex traders to see some volatility during the Asian session.

Major Events:

RBA cuts its rates by 25 bps – The most anticipated story is also the Asian session’s biggest catalyst. As speculated in Forex Gump’s Australian economy snapshot and RBA trading guide, the Reserve Bank of Australia (RBA) cut its interest rates by 25 basis points from 2.0% to 1.75%.

Details reveal that it was Australia’s latest CPI reports that prompted the central bank to cut its rates to its record lows. The RBA explained that while the quarterly data contains temporary factors, factoring in the subdued labor costs, low global inflation, and a not-so-overheated housing market significantly changes the central bank’s previous inflation forecasts.

Data from Australia and China – Japanese markets may be out for Japan’s Golden Week celebrations but Australia and China provided plenty of catalysts for forex traders. Aside from the RBA decision, the Land Down Under also printed a better-than-expected building permits data for the month of March.

Meanwhile, China’s Caixin manufacturing PMI echoed the weakness in the official figures released over the weekend as it falls for the 14th consecutive month. A closer look tells us that it was declines in new orders and export activities that dragged on the numbers.

Oil benefits from weak dollar – The Black Crack found a bit of support from the dollar sliding lower against the yen. For forex newbies out there, you should know that oil is usually priced in dollars and a weaker Greenback could incite more demand for the commodity. The rally was limited, however, by reports of more production from the Middle East countries and concerns for China’s growth. Will the bulls keep their momentum for the rest of the day?

Major Currency Movers:

AUD – Australia’s building permits report and RBA decision speculations supported the Aussie up until the central bank announced a rate cut. As a result, the high-yielding comdoll fell across the board like there was no tomorrow.

AUD/USD is now trading at .7570 after hitting a high of .7720 while AUD/JPY is now down to 80.13 after rising to 81.96. Ditto for GBP/AUD, which is now at 1.9428 after sliding to 1.9026.

Watch Out For:

  • 5:45 am GMT: Switzerland’s SECO consumer climate (-12 expected vs. -14 previous)
  • 8:30 am GMT: U.K. manufacturing PMI (51.3 expected vs. 51.0 previous)
  • 9:00 am GMT: Euro Zone PPI (0.1% expected vs. -0.7% previous)
  • 9:00 am GMT: Australian government prints annual budget and growth and inflation estimates

See more:

U.S. Session Forex Recap

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