Sponsored Advert

The RBA is getting more concerned about the outlook for consumption and, just as it didn't get too depressed by the rise in the unemployment rate to 5.9 percent earlier this year, it won't get too excited by the fall to 5.5%.' - Paul Dales, Capital Economics

The Reserve Bank of Australia remained concerned over employment and the housing market, official data released on Tuesday showed. The Central bank said that real estate prices were surging in Sydney and Melbourne but noted that price pressures started to ease to some extent, minutes of the Bank's last meeting when policymakers kept interest rates unchanged at 1.50% revealed. Apart from that, the RBA said that employment growth improved significantly over the past several months, while the number of hours worked dropped. The Bank held its meeting before employment data for May was released and showed that the jobless rate fell to a four-year low of 5.5% and the economy gained new jobs for the third consecutive month. Policymakers expressed concerns over housing debt, as it offset household earnings. The RBA stated that weak pay growth would unlikely rebound in the near future and, therefore, consumer spending is expected to remain weak. Despite the weak Q1 performance, policymakers said that economic growth would likely pick-up in the upcoming quarters.

 

Author: Dukascopy Swiss FX GroupWebsite: http://www.dukascopy.com/

Log in to comment
Discuss this article in the forums (0 replies).

Dollar rose mildly overnight but strength was so far limited. Comments from Fed officials were mixed and provided little guidance to the greenback. Meanwhile, Japanese Yen trades broadly lower on solid risk appetite and recovery in yields. DOW and S&P 500 surged to record close at 21528.99 and 2453.46 respectively. Nikkei followed and gains 0.81% to 20230.41. US 10 year yield recovered by adding 0.033 to 2.190, but it's still limited below 2.229 resistance. Similarly, dollar index is held below 97.77 resistance. EUR/USD is also staying above 1.1109 support. There is no change in Dollar's bearish trend yet.

Mixed comments from Fed officials

Comments from Chicago Fed President Charles Evans suggested he could lean towards waiting until the of the year to decide whether to raise interest rate again. He noted that "I don't see why we would not be served to allow more time to wait." He said that the current environment of low inflation "supports very gradual rate hikes and slow preset reductions in our balance sheet". And, "it remains to be seen whether there will be two rate hikes this year, or three, or four or exactly when we start paring back reinvestments of maturing assets." Evans urged Fed to "assure the public that we recognize the new low-inflation environment and that we are not overly conservative central bankers who see our inflation target as a ceiling."

On the other hand, New York Fed President William Dudley was more positive. He didn't sound much concerned with low inflation. Instead, he noted that the US is "pretty close to full employment. And if labor market continues to tighten further "wages will gradually pick up". And with that "inflation will gradually get back to 2%". Regarding the economy, Dudley also expressed that he is "confident" that the expansion has "quite a long way to go".

Timetable and structure agreed for Brexit negotiation

UK and EU representatives met in Brussels yesterday for the first formal Brexit negotiation. Agreement was made that talks until October should focus on the three issues of financial settlement, citizens rights and Northern Ireland. Further talks will be held in the weeks of July 17, August 28, September 18 and October 9. UK's Brexit Minister David Davis said he was "encouraged" by the first talks that "laid solid foundations for future discussions and an ambitious but achievable timetable". On the other hand, EU's chief negotiation Michel Barnier said that little was achieved other than setting a timetable and a structure for negotiations.

BoE Forbes warned of costs of waiting too long

The hawkish BoE MPC member Kristin Forbes warned that for a period, policy makers have been "underestimating the inflationary pressures". And there's a "cost to waiting" before the central bank raise interest rates. She noted that "the increase in headline inflation isn't just a temporary effect of the exchange rate that's going to go away." And policy makers have to be "very cautious in how these exchange-rate effects will affect these permanent components of inflation." She also said that that "if you wait for wage growth to pick up, you've waited too long." Forbes will end her term by the end of this month. BoE has appointed Silvana Tenreyro, an economics professor at the London School of Economics, to replace Forbes.

RBA minutes added nothing new

RBA minutes showed that the central bank was confident that growth will pick up again the the weak Q1. Nonetheless, the board cautioned the developments in labor and housing markets and said they "warranted careful monitoring". In particular, the minutes said that "members observed that low growth in incomes, along with high levels of household debt, appeared to have been constraining growth in household consumption." Overall, the minutes added little to what Governor Philip Lowe said yesterday. Lowe painted an optimistic picture and said that growth over the next couple of years will be "a bit stronger than it has been recently".

On the data front...

Australia house price index rose 2.2% qoq in Q1. German PPI dropped -0.2% mom, rose 2.8% yoy in May. Eurozone will release current account today. US will release current account later while Canada will release wholesale sales.

USD/JPY Daily Outlook

Daily Pivots: (S1) 110.96; (P) 111.27; (R1) 111.84; More...

USD/JPY's rally continues today and breaches 111.70 resistance. Intraday bias remains on the upside for near term channel resistance (now at 113.02). Sustained break there will suggest that whole pull back from 118.65 has completed at 108.12 already. In such case, further rise should be seen to 114.36 resistance for confirmation. On the downside, below 110.63 minor support will turn intraday bias neutral. Break of 108.81 will extend the fall from 118.65 through 108.12 low before completion.

In the bigger picture, price actions from 125.85 high are seen as a corrective pattern. It's uncertain whether it's completed yet. But in case of another fall, downside should be contained by 61.8% retracement of 75.56 to 125.85 at 94.77 to bring rebound. Overall, rise from 75.56 is still expected to resume later after the correction from 125.85 completes.

Source: Action Forex

Log in to comment
Discuss this article in the forums (0 replies).

In its continued effort to further lift the Naira, the Central Bank on Tuesday injected another 418 million dollars into various segments of the forex market after it injected 413.5 million dollars on Monday.

Figures obtained from the CBN indicate that the retail segment of the market received the highest intervention of 226 million dollars, followed by the wholesale window which received 100 million dollars.

The Small and Medium Enterprises window got 50 million dollars, while business/personal travel allowances, school tuition, medicals was allocated 42 million dollars.

According to the Apex bank, the volume of currency trading in the investors’ & exporters’ FX window now stands at 2.2 billion dollars.

 

Log in to comment
Discuss this article in the forums (0 replies).

Adeosun

The Federal Government plans to release a total of 350 billion Naira for capital projects across the country. 

Log in to comment
Discuss this article in the forums (0 replies).

Image

EUR: Euro has retreated after meeting resistance at 1.1213, offers are still noted at 1.1210-15, 1.1230, 1.1250, 1.1270, 1.1285 and 1.1300. On the downside, bids are seen at 1.1170, 1.1150-55, 1.1120-30, 1.1100, 1.1070-80, 1.1050, 1.1030 and 1.1000.

Log in to comment
Discuss this article in the forums (0 replies).

AUD/USD was under pressure in early day trading following news of a downgrade from rating agency Moody’s. The pair bounced higher in early European trading but fell under pressure during the North

Log in to comment
Discuss this article in the forums (0 replies).
Sponsored Advert