A lack of fresh catalysts pushed currency traders to the sidelines and inspired tight trading ranges.
The snoozer didn’t extend to the equities and commodities markets, however, Asian session forex traders got busy pricing in headlines from the previous trading session.
- RBA lowers inflation forecasts
- Japan’s tertiary industry activity slips by 0.2% vs. 0.1% decline expected and previous
- Asian bourses take hits on a bit of risk aversion
RBA moves its goalposts
Earlier today the Reserve Bank of Australia (RBA) shared its thoughts on monetary policy and the economy and, unfortunately, market players weren’t impressed.
On the plus side, the central bank still expects the economy to expand “at a solid pace” over the next couple of years with business outlook looking “more positive than it has for some time.” Meanwhile, improvement in employment conditions are expected to eventually push wages higher.
What caught investors’ attention, however, are changes to its inflation forecasts. The RBA now thinks that underlying inflation will stay at around 1.75% until mid-2019 compared to August’s estimates that CPI will hit 1.75% – 2.75% by June 2018. Heck, RBA even noted that the recent “re-weighting” of CPI means that underlying inflation was overstated by 0.3%!
Apparently, slow wage growth and strong competition in the retail scene are huge factors to slow inflation. A strong Aussie didn’t help either. See, the central bank still believes that
“If the exchange rate were to appreciate further, economic activity and inflation would be likely to pick up more slowly than currently forecast.”
Still Governor Philip Lowe and his team are confident that improvements in the employment sector will eventually push wages (and prices) higher.
Risk appetite takes a hit
With not a lot of data on the docket, Asian session traders took cues from their U.S. counterparts and priced in a bit of uncertainty over the difference between the Lower and Upper House versions of tax reform.
- Nikkei slipped by 1.10% to 22,618.00;
- Australia’s A SX 200 dipped by 0.37% to 6,027.00, and
- Hang Seng dipped by 0.15% to 29,093.50 even as
- China’s A50 popped up by 0.55% to 13,064.82.
Commodity prices didn’t fare any better with
- Gold slipping by 0.11% to $1,286.14;
- Brent crude oil falling by 0.31% to $63.73, and
- U.S. crude oil prices slipping by 0.28% to $57.01.
Major Market Mover(s):
The Aussie inched a tiny bit higher against its counterparts after reacting negatively to the RBA’s new inflation forecasts.
AUD/USD dipped to .7664 before finishing at .7686;
AUD/JPY jumped from a low of 86.89 to 87.14;
AUD/NZD climbed by 32 pips (+0.29%) to 1.1074, and
GBP/AUD slipped by 24 pips (-0.14%) to 1.7103.
Watch Out For:
- 7:45 am GMT: France’s industrial production (0.6% expected, -0.3% previous)
- 7:45 am GMT: France’s quarterly private payrolls (0.3% expected, 0.4% previous)
- 9:00 am GMT: Italy’s industrial production (-0.3% expected, 1.2% previous)
- 9:30 am GMT: U.K.’s manufacturing production (0.3% expected, 0.4% previous)
- 9:30 am GMT: U.K.’s goods trade balance (-12.9B GBP expected, -14.2B GBP previous)
- 9:30 am GMT: U.K.’s construction output (-0.6% expected, 0.6% previous)
- 9:30 am GMT: U.K.’s industrial production (0.3% expected, 0.2% previous)