Cut the takeaway: Reserve Bank of Australia June decision > 25 - bps rate, as expected > AUDUSD distributed on the rise
After cutting 50 basis points last month, the deterioration of Asian and European growth images prompted other rate by the Bank of Australia reserve. The RBA only reduced the rate of 25 - bps from 3.75% to 3.50%, according to the median forecast provided by Bloomberg News. However, with credit Switzerland Overnight Index swap price to 50-50 chance for a cut of 50 - bps, a surprise was in the cards and price action has certainly not disappointed.
Chart 1-minute AUDUSD: 5 June 2012
Graphing with Marketscope - prepared by Christopher Vecchio
Early release price action suggested that only a 25 - bps cut was due, the Dollar Australian rallying in all areas but particularly against the Yen and the U.S. Dollar. However, a few minutes before the release, it appeared that a cut of 50 - bps has filtered, with trade AUDUSD 0.9755 for only 0.9718 a minute before the decision was announced. However, with only 25 - bps down the chimney, the AUDUSD quickly regained ground and traded to 0.9791 shortly after. During the that drafting this report, the AUDUSD had plunged to its preliminary level before rising back to 0.9784.
Governor Glenn Stevens noted concerns in release covers of the RBA, with lots of time spent discussing the financial situation and global growth before touching on the evolution of the Australian economy. Presented below, without comment, are the key points of the policy statement:
Growth of the world economy, picked up in the first months of 2012, according to slow in the second half of 2011. Other moderation of growth in China. Conditions in other parts of Asia have largely recovered from the effects of natural disasters of the last year, but the trend is not clear and can be mitigated by the slowdown of Chinese growth. The United States continue to grow at a moderate pace. Raw material prices decreased lately, even if they are still mainly high. Terms of Australia of trade, reached about six months ago but they remain high. Financial markets:
The Council previously noted that Europe remains a potential source of adverse shocks. Economic and financial Europe's prospects have again been overshadowed by a weakening of growth, political uncertainty increased and concerns about the financial viability and strength of some banks. Capital markets remain open to spoil banks and corporations, but increased spreads. Long-term interest rates facing highly rated sovereign, including the Australia, have fallen to exceptionally low levels. The markets declined. In Australia:
In Australia, the available indicators suggest a modest growth continued in the first part of 2012, with significant variation between sectors. In all conditions of the labour market strengthened slightly, despite the excretion in certain industries, and the unemployment rate is low. Households and businesses continue to show a degree of behaviour of precaution, which may continue in the short term. Given this surprise (at least according to base swaps), in combination with the poor, we labour market reading Friday which has inevitably fueled speculation there, the AUDUSD might be initiated for a race towards the support of the former trendline from 0.9845/60. Gatherings should be covered by the 0.9880/0.9900, and a near daily over this area exposes 0.9930 and parity, 1.0000. Beyond these levels, we see little room for the AUDUSD to acquire new, because we believe that the ongoing stress in Asia and Europe will generate more-risk aversion, and gatherings should be seen as opportunities to sell.
After cutting 50 basis points last month, the deterioration of Asian and European growth images prompted other rate by the Bank of Australia reserve. The RBA only reduced the rate of 25 - bps from 3.75% to 3.50%, according to the median forecast provided by Bloomberg News. However, with credit Switzerland Overnight Index swap price to 50-50 chance for a cut of 50 - bps, a surprise was in the cards and price action has certainly not disappointed.
Chart 1-minute AUDUSD: 5 June 2012
Graphing with Marketscope - prepared by Christopher VecchioEarly release price action suggested that only a 25 - bps cut was due, the Dollar Australian rallying in all areas but particularly against the Yen and the U.S. Dollar. However, a few minutes before the release, it appeared that a cut of 50 - bps has filtered, with trade AUDUSD 0.9755 for only 0.9718 a minute before the decision was announced. However, with only 25 - bps down the chimney, the AUDUSD quickly regained ground and traded to 0.9791 shortly after. During the that drafting this report, the AUDUSD had plunged to its preliminary level before rising back to 0.9784.
Governor Glenn Stevens noted concerns in release covers of the RBA, with lots of time spent discussing the financial situation and global growth before touching on the evolution of the Australian economy. Presented below, without comment, are the key points of the policy statement:
Growth of the world economy, picked up in the first months of 2012, according to slow in the second half of 2011. Other moderation of growth in China. Conditions in other parts of Asia have largely recovered from the effects of natural disasters of the last year, but the trend is not clear and can be mitigated by the slowdown of Chinese growth. The United States continue to grow at a moderate pace. Raw material prices decreased lately, even if they are still mainly high. Terms of Australia of trade, reached about six months ago but they remain high. Financial markets:
The Council previously noted that Europe remains a potential source of adverse shocks. Economic and financial Europe's prospects have again been overshadowed by a weakening of growth, political uncertainty increased and concerns about the financial viability and strength of some banks. Capital markets remain open to spoil banks and corporations, but increased spreads. Long-term interest rates facing highly rated sovereign, including the Australia, have fallen to exceptionally low levels. The markets declined. In Australia:
In Australia, the available indicators suggest a modest growth continued in the first part of 2012, with significant variation between sectors. In all conditions of the labour market strengthened slightly, despite the excretion in certain industries, and the unemployment rate is low. Households and businesses continue to show a degree of behaviour of precaution, which may continue in the short term. Given this surprise (at least according to base swaps), in combination with the poor, we labour market reading Friday which has inevitably fueled speculation there, the AUDUSD might be initiated for a race towards the support of the former trendline from 0.9845/60. Gatherings should be covered by the 0.9880/0.9900, and a near daily over this area exposes 0.9930 and parity, 1.0000. Beyond these levels, we see little room for the AUDUSD to acquire new, because we believe that the ongoing stress in Asia and Europe will generate more-risk aversion, and gatherings should be seen as opportunities to sell.
the takeaway: German factory orders decline of 1.9% in the month of April-> several indicators of possible contraction-> Euro cancels the previous session gains
The EUR/USD appeared to ignore the worst decline expected in the commands of the plant, as the slightly higher fixed pair follows a giant lower 1.2450 earlier in the session. Feelings of risk are down after the Spanish Minister of the Budget of the negative comments on a rescue plan and the rumours that the G7 leaders will participate in a conference call.
