RBA cut the cash rate by 25bps to new record low of 2.00% as widely expected. But Aussie recovered after the announcement on view that the current easing cycle has ended. The central bank said in the accompanying statement that "the Board judged that the inflation outlook provided the opportunity for monetary policy to be eased further, so as to reinforce recent encouraging trends in household demand. " But it dropped the line "further easing of policy may be appropriate over the period ahead... " Regarding the economy, RBA sounded more optimistic, noting that "available information suggests improved trends in household demand over the past six months and stronger growth in employment" even though, the economy is "likely to be operating with a degree of spare capacity for some time yet."
While the Aussie recovered, it should be noted that RBA still believed that "further depreciation seems both likely and necessary, particularly given the significant declines in key commodity prices. " Also, technically, AUD/USD's recovery is held by 0.7918 minor resistance and well below 0.8074 near term resistance. Thus, deeper decline is still in favor for a test on 0.7532 low ahead. Current recovery in AUD/USD could just be a knee-jerk reaction to RBA. Also released from Australia, trade deficit narrowed to AUD -1.32b in March, wider than expectation of AUD -0.98b.
In US, Chicago Fed president Charles Evans said that his "preference" is not to raise interest rate too soon and he's not "confident" enough for a hike "until early next year". He said the "weak first quarter data do give me pause" and he's like to have more time to confirm if Q1's weakness is a "transitory aberration". And, he saw "significant risks, but few benefits, to increasing interest rates prematurely." San Francisco Fed president John Williams said he's "very optimistic as to where the economy is going over the next couple of years. He expected unemployment rate to drop from current 5.5% to 5.0% by year end.
Looking ahead, UK PMI construction and Eurozone PPI will be the main feature in European session which European commission will release updated economic forecast. Canada will release trade balance later in the day. US will release ISM non-manufacturing composite and trade balance.