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RBA Rate Decision on Tap at 4:30GMT

The RBA is set to release its next rate decision a bit later in the session which could have an influence on the above mentioned pairs. At the previous meeting on May 7th, the RBA cut rates by 0.25% bps to 2.75%.

The pair has been a steep downtrend since the last meeting, losing just over 700 pips and trading as low as 0.9528 at one point last week. However, the pair did manage to close today’s session sharply higher, climbing 147 pips to finish at 0.9769. Over the past two weeks, both Private Capital Expenditures (-4.7% vs. 0.7% forecast) and Retail Sales (0.2% vs. 0.3% forecast) came in below estimates. However, Building Approvals did surprise to the upside (+9.1% vs. 4.1% forecast). Given the fact the pair lost as much as 7% over the past 3 weeks, it’s hard to imagine the RBA not remaining on hold at the current level of 2.75%.

According to analysts at NAB Global, "markets are well and truly priced for no change (this morning priced as an 84% chance), though the market also remembers that the May cut was something of a surprise. We expect no change given the RBA’s semi-relaxed stance even though we would see a rate cut as a suitable policy given the coming mining downturn and still low inflation"

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The EUR/USD finished the day sharply higher, at one point trading all the way up to 1.3107 beforre leaking lower in the day to close up 76 pips at 1.3070. Some analysts were pointing towards weaker than expected ISM data out of US as the main catalyst for the bullish move in the pair. Economic data out of the US will slow down a bit the next few days, but volatility is certain to pick up as we approach the ECB Rate Decision on Thursday, as well as the Non-Farm Payrolls number due out of the US on Friday.
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Local share markets are mixed today in the Asia-Pacific, with a little tendency into the red, and volatility around Nikkei index being the main factor till now. The index opened in Tokyo printing fresh 6-week lows just shy of the 13k key level, down around -1.5%, for then bouncing from there, till current +1.33% of gains 400 points higher.
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