Ausssie Regains Bid Tone Ahead of RBA (Opening Comment)

Published October 5th, 2009 - 09:07 GMT


OPENING COMMENT

Despite the rumors that the G7 would produce a different and more aggressive line on currencies, the Group once again failed to make any new headway on the topic, after repeating the familiar language that “excessive volatility and disorderly movements were unwelcome….” Japan’s Fuji did however say after the meeting that intervention was a possibility if currencies shoed excessive movement. All currencies are tracking higher against the buck in early trade, with the Aussie gaining the most ground, and tracking higher by some 1%. Some better second tier data results in the form of job ads and service sector activity have certainly not hurt the single currency, with many also buying the recent dips ahead of Tuesday’s much anticipated RBA event risk. Many market participants have been pricing in a rate hike, which would be significant, with the RBA being the first central bank to revert back to a tightening cycle. However, we contend that this would be a mistake and the RBA should still remain on hold. While Kiwi has also performed admirably on the session, the higher yielding antipodean has also been weighed down somewhat on the back of earlier comments from FinMin English who said that the economy was at risk for another down-leg. Elsewhere, in the EU, Ireland voted “Yes” in an overwhelming 2:1 margin to approve the Lisbon Treaty. Finally, doom & gloomer Roubini was on the wires warning that the recovery in global equities and commodities was too much. Looking ahead, key economic releases in the European session come through Eurozone services PMI (50.6 expected) at 8:00GMT, UK services PMI (54.5 expected) at 8:30GMT, and Eurozone retail sales (-0.5% expected) at 9:00GMT.


 

Written by Joel Kruger, Technical Currency Strategist for DailyFX.com
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