Will the RBA's QE Tapering Face Delay This Afternoon?
AUD
The AUD was trading within tight ranges if not marginally lower against the major currency pairs. Asian Equities started the week off on the front-foot with the Nikkei up a significant 1.8% and the Shanghai Comp also performed 1.1% however the ASX underperformed as it posted modest gains of 0.1%. Commodities traded almost at no gain, with Gold, Silver and Iron Ore trading among the levels seen to Monday morning. The RBA will meet today and decide on its monetary policy for the foreseeable future. The drums have been beating louder on expectations that the RBA Board will announce a delay to the planned tapering of its bond purchases from $5 Billion to $4 Billion per week from early September. The risks of a delayed taper have risen as economic activity has fallen sharply with 60% of Australians under stay-at-home orders. The Bank has said that the bond purchase program will “continue to be reviewed in light of the economic conditions and the health situation” and that it “would be prepared to act in response to further bad news on the health front should that lead to a more significant setback for the economic recovery”. A decision at 2.30pm to proceed with the planned tapering reduction should result in AUD strength and vice versa.
USD
The AUDUSD pair is trading almost unchanged from yesterday, the interbank rate sitting at 0.7348 at the time of writing. It was a quieter night in markets with the US observing the Labor Day holiday, US Stocks and bond markets were closed. Crude Oil prices fell, with brent crude down more than 3% since Friday to just above 72$ a barrel after Saudi Arabia cut crude prices to Asian customers more than expected. There is no noteworthy local economic data for the US pair with only the upcoming RBA meeting in Australia to shape the markets over the next 24 hours as investors are certain that interest rates will remain on hold, the prospects of a delay to tapering is the risk. This leaves the Aussie vulnerable to movement around 2.30pm this afternoon.
EUR
The AUDEUR pair is trading sideways this morning, currently trading a rate of 0.6262. European Equities traded relatively higher and closed with solid gains, the DAX gaining 1% and the CAC up 0.8%. Early data came from Germany where factory orders jumped by 3.4% in July, comfortably beating the forecasted contraction of 0.7%. There’s a flurry of Euro data this evening with Economic Sentiment surveys, the Eurozone Final Employment change and Revised GDP among the releases.
GBP
The AUDGBP pair is trading a few ticks higher this morning, currently trading at a rate of 0.5373 at the time of writing. The London Benchmark FTSE 100 performed 0.5%. In some early data, the UK construction PMI for August came in at 55.2, short of the forecast of 56.0. Overnight the UK recorded its seven millionth covid case since the start of the pandemic, according to the government data. It comes after 41,192 new infections were reported in the latest 24-hour-period, along with the 45 more covid-related deaths. Little in the way of economic data releases today with only the UK MPC Members speaking this evening. Movement to be driven by this afternoon's RBA meeting.
NZD
The AUDNZD pair followed suit to trade at similar levels seen to Monday, currently offering a rate of 1.04250 this morning. The cross-currency pair refreshed yearly lows the previous week and has now been struggling for a clear direction. The latest lackluster moves could be linked to the cautious sentiment ahead of the monetary policy meeting of the RBA in Australia later today. There is no local data on the docket this evening.