- RBA cut interest rates from 2.50% to 2.25%
- Australian building approvals down by 3.3% vs. estimated 4.8% decline
- Australia’s trade deficit narrowed from 1.02B AUD to 0.44B AUD
- New Zealand dairy auction scheduled today
- Spanish unemployment change and U.K. construction PMI due
The spotlight was on the RBA in today’s Asian trading session, and the central bank put on a good show by announcing a rate cut from 2.50% to 2.25%. As expected, RBA Governor Stevens gave a downbeat assessment of the economy and even predicted that growth could stay below-trend for some time. The policy announcement also contained a bit of jawboning, as Stevens mentioned that further exchange rate weakness is needed to achieve more balanced growth.
Prior to this, Australia released a couple of better than expected reports, namely its building approvals data and trade balance. Building approvals chalked up a 3.3% decline, smaller than the estimated 4.8% drop, while the trade deficit narrowed from 1.02 billion AUD to 0.44 billion AUD. Despite this, the Australian dollar sold off across the board due to the RBA rate cut, with AUD/USD down by close to 150 pips (-1.90%) and AUD/JPY down by 211 pips (-2.31%).
The Kiwi followed the Aussie’s footsteps in the past few hours, with NZD/USD looking at a 94-pip loss (-1.31%) and testing the .7200 handle. Other dollar pairs barely budged, with EUR/USD down by 0.08% and GBP/USD looking at a 0.10% decline. Yen crosses are much lower, as risk aversion kicked in.
Up ahead, the forex calendar shows that New Zealand is set to have its dairy auction later in the day. This could spark a Kiwi rally if prices show another increase, as gains have been seen since mid-December last year. Also lined up for today are the Spanish unemployment change report (9:00 am GMT), which might indicate an 83.4K increase in joblessness, and the U.K. construction PMI (10:30 am GMT).
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