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Forex: RBA in no hurry to ease

On a relatively tight overnight session on the majors, the Aussie is the standout having risen in the wake of the steady rate decision from the RBA. Surveys of institutions suggested a reasonable risk of an easing, but the RBA kept rates at 2%, with the statement suggesting a slight improvement in the outlook for the economy. The view is that the current accommodative level of rates is appropriate and there were no changes to the comments on the currency. The price action on the Aussie over the past few weeks suggests that it is more comfortable forming a base above the 0.70 level, with only the kiwi having outpaced the Aussie since the previous push below 0.70 on AUDUSD seen at the end of September. Overall, the sense is that the RBA are not in a hurry to cut rates further, indeed if a further cut is seen.

In Europe, there were some better final PMI numbers yesterday to give the euro some marginal support, with a notably stronger print in the UK giving a boost to the pound which proved to be transitory against both the dollar and euro. The focus remains on Thursday’s policy meeting and the reaction of the MPC to some of the softer data of late (yesterday’s PMI aside). Key data releases are few and far between today, leaving FX majors to trade more from levels and sentiment in the wider financial sphere, where the bullish tone to equities seen last month (especially in the US) was further enhanced yesterday, the S&P closing above the 2100 level for the first time since mid-August.

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