Aussie recovers strongly in Asian session after released of less dovish than expected RBA minutes. Meanwhile, Canadian dollar is also lifted as WTI crude oil extends recent rise and broke 48 handle. Sterling closely follows and rebounds against Euro, Dollar and Yen. The greenback is under some pressure as talk of the odd of Fed June hike continues even though futures point to practically no chance. The strong rebound in US equities, with DJIA closed up 1%, took Asian stocks high but China remains under pressured. The economic calendar is rather busy today with inflation data featured in Swiss, UK and US.
The RBA in its minutes for the May meeting explained in details the rationale for the surprising rate cut earlier this month. Despite no material change in the economic outlook or the employment situation, the inflation outlook appeared to have weakened. Such concern was reflected in the central bank's downward revisions on inflation (underlying inflation was expected to remain around 1-2% this year and to pick up to 1.5-2.5% by mid-2018) and the key reason for the -25 bps rate cut. Policymakers noted that they had taken into account the housing market situation. They believed that supervisory measures adopted so far have been effective in curbing the risks of rate cut and excessive housing price appreciation. More in RBA Minutes Unveiled Members Had Considered Putting On Hold In May.
Richmond Fed president Jeffery Lacker said yesterday that inflation is moving "decidedly" towards the 2% target while downside risks to growth have "dissipated". And that "adds up to a pretty strong case for a June move". Fed fund futures are only pricing in 4% chance of June hike. Lacker note that "I think it's useful if markets are well-aligned with our expectations going into a meeting, but I don't think if they're not, it's a show-stopper." Meanwhile, there are talks that Fed could still hold their hands in June and wait for the result of EU referendum in UK, which is scheduled a week after FOMC meeting. And, speculations of July hike is starting to emerge.
Looking ahead, Swiss PPI, UK CPI, PPI, Eurozone trade balance will be featured in European session. US will release housing starts and building permits, CPI and industrial production later in US session.