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August 2016

RBA minutes positive despite decision to cut

Published: Tuesday 16 August 2016

  • RBA minutes positive despite decision to cut 
  • Sterling continues to suffer losing nearly 1% against its major counterparts
Overnight the Reserve Bank of Australia released the minutes of the recent meeting when they lowered interest rates by 0.25% to 1.5%. The minutes stated that there had been a broad agreement to cut rates in August but the committee did not really expand on whether or not the RBA would lower rates again this year. Very little policy action has been priced in by markets and any indication that this may be the case should see the Australian Dollar lose a little of its current lustre.

The US Dollar remains under pressure and yesterday’s weaker than expected manufacturing data was the catalyst for a further fall as the US Dollar fell to almost 1.13 versus the Euro. Traders are becoming less certain that the Federal Reserve will raise rates this year in light of the patchy economic data emanating from the States. The risk is certainly two way and the US Dollar will be whipped around by the volatility of near term data releases.

Sterling had another awful day losing nearly 1% against its major counterparts by the close of play yesterday. Today we await the first major data release Post-Brexit as inflation data is due this morning. The weaker exchange rate is expected to force prices higher however it may be too early to see the full impact in this month’s figures. Sterling has fallen to a new fresh three year low versus the Euro and although it does look a little over done at the moment, the market is already very short of Pounds. Sentiment would also seem to indicate that it has further to fall. For now, any rallies will be limited.

Wake up call

A man and his wife were having some problems and were giving each other the silent treatment. The next week, the man realized that he'd need his wife to wake him at 5 a.m. for an early flight.

Not wanting to be the first to break the silence, he finally wrote on a piece of paper: "Please wake me at 5 a.m."

The next morning the man woke up, only to discover it was 9 a.m. and he'd missed his flight.

Furious, he was about to go and scream at his wife when he noticed a piece of paper by the bed that said: "It's 5 a.m. Wake up.”

Today's Major Economic Releases 

Market BST Data/Event Previous Expected
GBP 09:30 UK: CPI y/y 0.5% 0.6%
GBP 09:30 UK: PPI input m/m 1.8% 3.3%
GBP 09:30 UK: RPI y/y 1.6% 1.9%
EUR 10:00 EU: German ZEW economic sentiment -6.8 2.1
EUR 10:00 EU: Trade balance 24.5b 23.2b
CAD 13:30 Canada: Manufacturing sales m/m -1.0% 0.8%
CAD 13:30 Canada: Building permits 1.15m 1.16m
CAD 13:30 Canada: CPI m/m 0.2% 0.0%
CAD 13:30 Canada: Core CPI m/m 0.2% 0.2%
USD 14:30 US: Industrial production m/m 0.6% 0.2%
NZD 23:45 New Zealand: Employment change q/q 1.2% 0.6%
NZD 23:45 New Zealand: Unemployment rate  5.7% 5.3%

FX Research by Ricky Nelson

Daily Currency Analysis with Michael Hart 

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