Overview
Overnight, AUD strengthened substantially against major pairs after the RBA stood pat on its benchmark rate despite markets pricing in a 25bps cut, leading AUD/USD to briefly break above 0.7700 and AUD/NZD to pull away from parity. Furthermore, participants shrugged off dovish commentary from RBA’s policy statement as the central bank hinted at further easing and AUD weakening in the period ahead. Elsewhere, JPY weakened across the board as risk-off sentiment abated and the USD continued to pare back NFP-inspired losses, with USD/JPY trending towards the 120.00 handle.
Throughout the European morning, the USD-index extended on yesterday’s gains to erase the entire losses from Friday’s dismal Nonfarm Payrolls report, with US 10y yields above 1.90% said to have stoked appeal in the greenback. As such, USD strength offset the better-than-expected UK services PMI (58.9 vs Exp. 57.0), leading GBP/USD to trade marginally higher throughout the day. Moreover, despite several Eurozone Services PMI figures topping estimates and Eurozone PPI (0.5% vs. Exp. 0.1%) posting a sharp beat on expectations, EUR trended lower against major pairs, with EUR/USD drifting further away from the 1.1000 level to languish firmly below 1.0900, while EUR/GBP was seen below 0.7300 for most of the European morning.
Looking ahead, tomorrow sees US DoE Crude Oil Inventories, release of Fed March 17-18 FOMC meeting minutes and the BoJ’s Annual Rise in Monetary Base, as well as a host of central bank speakers, with ECB’s Linde and Noyer, Fed’s Powell and Dudley all due on the slate. Furthermore, BoJ’s Kuroda is due to hold a press conference alongside the BoJ policy statement, while Greek PM Tsipras is meeting his Russian counterpart Putin in Moscow.