The Reserve Bank of Australia minutes overnight provided little inspiration for AUD traders, as the statement was very similar to the June one and suggested satisfaction with the current 2% rate and dependency on incoming data.
Interest rates hardly registered the minutes as the focus shifts to tonight’s Q2 CPI release and a major speech by the RBA's governor Glenn Stevens. AUD traded slightly weaker overnight as AUD/USD is poised near the lows for the cycle below 0.7350 that were posted yesterday.
The Bank of Japan minutes were likewise greeted with a collective yawn, though some BoJ members are getting restless on whether the effects of the stimulus thus far are fading. The JPY continues to tiptoe quietly in the background in low-beta-to-the-USD fashion. Again, with the JPY, any rally seems to require ugly risk appetite developments to drive upside and, on the flipside, new highs in yields if we are to see a pickup in selling interest.
EUR/USD actually posted marginal new lows for the cycle late in the Asian session as the USD was generally toward the stronger end of recent range in most of the major pairs – we’ve got little data of note for the US through the end of the week, though we will see the preliminary PMI data for both Europe and the US (with the market paying little attention to the latter because it is a Markit survey that competes with the official ISM surveys).
Perhaps adding a bit to the USD strength was St. Louis Federal Reserve Bank president James Bullard saying yesterday that a September Fed hike has better than 50-50 odds.
Chart: AUD/USD
The focus is on AUD tonight as we await the Q2 CPI and speech by the RBA's governor Stevens. The general tone from the RBA has been one of “wait and see”, but if there is a surprise side, it is likely to the dovish side on longer-term concerns on Australia’s external imbalances owing to commodity weakness, which has been gathering pace lately.
AUD/USD is stuck in a slow-motion slide and we're looking for an impulse here to reinvigorate the bearish argument.
The G-10 rundown:
USD: Still poised for further gains, but no catalysts in sight today besides flow/sentiment and risk appetite. We’re nearing/at interesting areas in several major USD pairs – watching whether 124.60/125.00 is challenged successfully in USD/JPY and 1.0800 in EUR/USD as trading gets under way in London today.
EUR: Weak, but the theme not shifting as strongly back to euro selling (as opposed to AUD and CAD selling, for example) as was expected.
JPY: Very anonymous in the background – direction to be found in deterioration/pick-up in Japanese data (could move the needle on BoJ expectations finally) and/or risk appetite, bond yield moves.
GBP: Keeping the higher range for now in GBP/USD as the 38.2% Fibonacci level provided support, and EUR/GBP still looks in selloff mode.
CHF: Will attention pick up for the technically compelling USD/CHF trade? We’ve got a good rally going there, though momentum hasn’t exactly overwhelmed. EUR/CHF continues to trade sideways, and the weak CHF theme might require new highs for the cycle in equities and/or higher yields, somewhat like the JPY.
AUD: RBA minutes provided little reason to trade – but tonight’s CPI and RBA governor speech should see volatility picking up amid the slow-motion slide of late in AUD/USD.
CAD: Action in USD/CAD drifting around the key 1.3000 area as we watch for USD to consolidate or build a head of steam again. Support in USD/CAD comes in 1.2900 area.
NZD: Looking to get short NZD/USD, but some risk of a sell-the-rumour-buy-the-fact on the RBNZ meeting tomorrow night (early Thursday for Asian traders), though the story for the kiwi remains bearish. Watching the 0.6600/50 area for resistance.
SEK: Tough to find a reason to trade as EUR/SEK stuck mid-range.
NOK: Weak oil prices and weak commodity theme keeping NOK weak, even if it is undervalued in places.
Upcoming economic calendar highlights (all times GMT)
- Hungary Central Bank Rate Decision (1200)
- Australia Q2 CPI (0130)
- Australia RBA Governor Stevens to Speak (0305)