Before you trade the much-awaited NFP report, let’s review what the major central banks had to say and how they affected the major currencies’ price action!
Reserve Bank of Australia (RBA)
What did the RBA say?
The RBA kept its interest rates at a record low of 2.50% but had dropped its easing bias. The central bank now believes that a “period of stability” in interest rates is prudent. Not only that, but the RBA also dropped its comments about the Aussie being “uncomfortably high” and instead mentioned that “the exchange rate has declined further, which, if sustained, will assist in achieving balanced growth in the economy.”
How did the AUD pairs react?
The Aussie immediately rallied across the board and finished the day 178 pips higher against the dollar and 247 pips higher versus the yen. Talk about making a comeback!
Bank of England (BOE)
What did the BOE say?
Like last month, the Monetary Policy Committee (MPC) kept its interest rates and asset purchases plans steady at 0.50% and 375 billion GBP respectively and opted not to release a statement. Don’t think that the BOE doesn’t have plans though! As we saw in the BOE decision trading guide this week, the central bank isn’t shy on using other opportunities to announce its biases.
How did the GBP pairs react?
Since analysts had been looking for a less rate hike-friendly revision in the BOE’s forward guidance, the lack of announcement was taken positively by the pound bulls. GBP/USD capped the day with an 11-pip gain while GBP/JPY enjoyed a nice 141-pip rally.
European Central Bank (ECB)
What did the ECB say?
Like the other central banks, the ECB didn’t make changes to its interest rates. Trading the euro wasn’t a bore though, since Mario Draghi spiced up the common currency’s price action. While he reiterated that the central bank is ready to act when needed, he didn’t talk of the central bank’s concerns over low inflation, uneven growth, and money market movements. In fact, he even remarked on improvements in consumer confidence and the economy!
How did the EUR pairs react?
With so many euro bears closing their bets and bulls jumping in, the euro quickly became king of pips in yesterday’s trading. EUR/USD ended the day 53 pips higher than its open price while EUR/JPY saw a 164-pip jump.
There you have it, folks! Although we still have the NFP report to look forward to, the central bank decisions above might already factor in the major currencies’ short-term price action. What do you think? Did the RBA, BOE, and ECB just change the short-term direction of their respective currencies? Place your votes on the poll below!