The main standout in overnight trade has been the Aussie, jumping back above the 0.77 level in the wake of the latest interest rate decision. There was no surprise to see rates being held at 2% and once again, the central bank were seeing further AUD depreciation and both likely and necessary. That said, there were no indications of future potential easing, resulting in a 1% bounce in the currency as the rationale for the recent weakness felt that much weaker. The kiwi has also been taking the brunt of the recent dollar strength, down to another new low for the year overnight, but since staging a partial recovery on the back of the Aussie moves. We’ve also seen a further rate cut in India, with rates cut by a further 0.25% to 7.25% on the repo rate.
Two factors still dominating this week. The first is the continued recovery in the dollar, with yesterday’s ISM manufacturing data better than expected, together with the construction spending numbers. The dollar continued to benefit the most vs. the yen on the majors, USDJPY briefly above the 125.00 level before pulling back into the European open. Markets are still focused on Friday’s jobs numbers and the potential for establishing further dollar gains on the back of stronger numbers. The other factor remains Greece, where there was a hastily arranged meeting in Germany between the creditors, where further strains are emerging on how to move ahead. This really does look like the month that Greece will run out of money if nothing is done to resolve the current deadlock.