The announcement of the monetary policy meeting of the Reserve Bank of Australia surprised markets as the decision was to keep interest rates unchanged at 2.25% rather than cutting them by another quarter point as expected by most economists. The Australian dollar managed to climb to 0.7835 from around 0.7770 against the US dollar prior to the announcement. However, the overall tone from the RBA suggested that a rate cut could take place in coming months as the economy was still growing below trend and there was still a call for the aussie to depreciate.
The yen also gained, after an advisor to the Japanese Prime Minister said that any further gains in dollar / yen would be unjustified. Dollar / yen reversed course after trading as high as 120.30 in the early Asian session, falling below 120 to 119.55. Despite Wall Street breaking new record ground overnight and the tech-heavy NASDAQ crossing above the bubble-era landmark of 5,000, there was some profit-taking for Japanese stocks, which helped the yen. There is certainly a lot of interest whether dollar / yen is going to manage to break February’s high of 120.47 and then take on the multi-year high of 121.84 registered in December of 2014.
The dollar was under some pressure following somewhat weaker-than-expected numbers on personal income and spending the previous day. Dollar traders are focusing on the February employment report to be released on Friday and which is expected to show the US labor market continuing to improve.
In other news, Swiss GDP for the fourth quarter came out stronger-than-expected at +0.6% quarter-on-quarter, while German retail sales jumped 2.9% month-on-month, also beating estimates.
Looking ahead the data calendar appears rather thin, with UK Construction PMI, eurozone PPI and Canadian GDP. Bank of England Governor Mark Carney will also speak today.