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The Aussie seesawed between the Australian current account and RBA releases, while the dollar was haunted by weak U.S. reports.

  • U.K. BRC retail sales monitor (y/y) down by 0.4% vs. 5.6% growth in April
  • Japan’s average cash earnings (y/y) up by 0.5% vs. 0.3% expected, 0.0% previous
  • NZ ANZ commodity prices up by 3.2% vs. -0.2% previous
  • AU current account deficit clocks in at 3.1B AUD vs. -0.2B AUD expected, -3.5B AUD previous
  • RBA keeps interest rates at 1.50% as expected

Major Events/Reports

Disappointing current account data from Australia

Before the Reserve Bank of Australia (RBA) even made headlines, the Aussie was already under pressure from Australia’s current account report.

See, data released earlier today saw Australia’s current account deficit clocking in at its narrowest since 1979 thanks to higher exports prices. But while that should have caused celebration among the bulls, investors chose to focus on the fact that it missed market expectations.

More importantly, the “net exports to GDP” component – which will directly factor in the GDP – came in at -0.7% when analysts had expected it at -0.4%. This supported concerns that we may see another negative GDP reading this week after all.

RBA keeps interest rates unchanged

The Aussie’s intraday downtrend didn’t get its momentum, though, especially after the RBA kept its interest rates at a record low of 1.50% for the 10th consecutive month as expected.

Apparently, the RBA still believes that holding its policy unchanged is “consistent with sustainable growth in the economy and achieving the inflation target over time.”

In its release, the central bank pointed out that while commodity prices have risen, iron ore prices have also given up some of their earlier increases as expected.

The RBA also believes that “the transition to lower levels of mining investment following the mining investment boom is almost complete,” a departure from “the economy is continuing its transition” bit from last month.

On employment, Lowe and his gang repeated that “wage growth remains slow” but now added that “slow growth in real wages is restraining growth in household consumption.

As for the housing market, the RBA nodded to lenders increasing their mortgage rates, especially for investors and interest-only loan-seekers. Not only that, but while prices are still rising in some markets, there are now “some signs that these conditions are starting to ease.

Overall, the RBA estimates that GDP growth has slowed in Q1 2017 even as they still expect the economy to gradually increase to a little above 3% in the next couple of years.

Overall risk aversion

Concerns over the U.K. elections, the upcoming ECB statement, and Comey’s testimony on Thursday weighed on risk appetite earlier today.

Of course, it also didn’t help that Uncle Sam had printed weak economic reports during the U.S. session and that a leak in the NSA pointed to stronger evidence of Russians hacking the U.S. elections.

Nikkei, which recently celebrated new highs, cracked under the pressure of weak USD/JPY, strong yen, profit-taking, and a tepid Wall Street close. It ended mid-day trading 0.7% lower to 20,026.45.

The Shanghai index also fell by 0.22%, Australia’s A SX 200 lost 1.09%, while Hang Seng gained 0.31%.

Meanwhile, oil lost its reprieve as it continued its slide after Saudi Arabia and a couple of other Arab countries cut diplomatic ties with Qatar.

Black Crack prices fell for a third day today with Brent crude sliding 0.4% lower to $49.27 while U.S. oil prices also dropped by 0.2% to $47.21.

Major Market Mover(s):

AUD

The weak current account data weighed on the Aussie at the start of the session, but the bulls stepped in as soon as the RBA printed its not-so-dovish statement.

AUD/USD dipped to a session low of .7457 before rising back up to .7467, AUD/JPY dropped to 81.91 before recovering to 82.03, and AUD/NZD shot up to 1.0506 before going back down to 1.0444.

JPY

Flight to safety was the name of the game during the Asian session, as dollar weakness and overall risk aversion drove traders to the low-yielding yen.

USD/JPY fell by 61 pips (-0.55%) to 109.87, EUR/JPY dropped 55 pips (-0.44%) to 123.80, and GBP/JPY slipped by 52 pips (-0.37%) to 142.06.

Watch Out For:

  • 8:10 am GMT: EU retail PMI (52.7 previous)
  • 8:30 am GMT: Sentix investor confidence (27.6 expected, 27.4 previous)
  • 9:00 am GMT: Euro Zone retail sales (0.2% expected, 0.3% previous)