A not-so-hawkish RBA statement spelled trouble for the Aussie, while overall risk aversion boosted the yen across the board.
- NZ NZIER business confidence ticks up from 17 to 18
- AU retail sales rises by 0.6% vs. 0.2% expected, 1.0% previous
- RBA keeps rates steady at 1.50% as expected
- BOJ’s core CPI (y/y) improves from 0.2% to 0.3% as expected
- North Korea fires another missile into Japan’s waters
RBA’s policy decision
If you’ve read Forex Gump’s RBA preview, then you’ll know that markets had expected a lot from the central bank today. This is probably why the Aussie tumbled fast when those expectations weren’t met.As expected, Philip Lowe and his team kept their interest rates steady at 1.50% for another month. If we look closely at the release, though, you’ll see that the central bank continues to be concerned over slow wage growth.
After patting its back on calling the weaker growth in Q1 2017, the RBA went on to say that “consumption growth remains subdued, reflecting slow growth in real wages and higher levels of household debt.”
The sentiment isn’t really surprising given that they’ve already warned that “slow growth in real wages is restraining growth in household consumption” last month.
But since many analysts had expected the RBA to jump on the hawkish trend recently set by the ECB, BOE, and BOC, the lack of hawkish remarks sentiment pushed currency bears out of the woodwork.
Mixed risk sentiment
Unlike in the previous trading sessions, the Asian bourses showed little consistency across the board. Of course, it didn’t help risk appetite that North Korea launched another missile into Japan’s waters. Again.
A stronger dollar sent Nikkei 0.38% higher while expectations from the RBA pushed Australia’s A SX 200 1.70% higher. Meanwhile, the Shanghai index is down by 0.50% while Hang Seng is down by 0.41%.
RBA’s disappointment aside, the Asian bourses mostly tracked their European and U.S. counterparts and traded on a risk-friendly environment.
As mentioned in my previous recaps, optimism over Uncle Sam’s stronger-than-expected reports and strong equities performance.
Major Market Mover(s):
A “disappointing” RBA statement sent Aussie bears out to party in the pip streets.
AUD/USD is down by 35 pips (-0.46%) to .7627, AUD/JPY is down by 65 pips (-0.75%) to 86.28, GBP/AUD is up by 86 pips (+0.51%) to 1.6980, and AUD/NZD is down to 1.0488 after hitting a session high of 1.0553.
Yen crosses edged lower today. Some analysts point to USD/JPY’s retracement from its U.S. session highs, while others believe that risk aversion has caught up to some of the yen pairs.
By mid-day trading USD/JPY is down by 27 pips (-0.24%) to 113.19, EUR/JPY is down by 18 pips (-0.14%) to 128.73, and GBP/JPY is down by 31 pips (-0.21%) to 146.55.
Watch Out For:
- 7:00 am GMT: Spain’s unemployment change
- 8:30 am GMT: U.K. construction PMI (55.0 expected, 56.0 previous)
- 9:00 am GMT: Euro Zone PPI (-0.2% expected, 0.0% previous)