FX:Commodity prices apart from the precious metals eased today
The Reserve Bank of Australia has left its benchmark interest rate unchanged at 4.75% for the eighth consecutive meeting citing the “acute sense of uncertainty” in global financial markets as the key factor for the decision while still saying that “the board remains concerned about the medium term outlook for inflation.” The AUD dropped the most in two weeks to as low as 1.0900 while the 10 year government bond yield fell below the cash rate for the first time since the beginning of 2009. On the other hand, across the Tasman, New Zealand wage gains accelerated in the second quarter which has added to inflation pressure and the likelihood of the RBNZ raising official rates soon. As a result, the AUDNZD cross rate has plummeted to as low as 1.2440 today from a high of 1,2575.
The USD managed to gain against most of the majors after the US debt ceiling increase was approved by the House of Representatives and it was clear that the legislation would be passed through the Senate. The EUR and GBP are both trading near their session slows at 1.4225 and 1.6300. However, USDCHF and USDJPY remain under significant pressure in a sign that risk aversion still dominates the investor mentality despite increasing signs that the Bank of Japan may be intervening in the market. There is mounting concern from policy makers in Japan that JPY strength will threaten Japan’s recovery from March’s devastating earthquake. USDJPY is significantly lower than the 82.60 average that exporters used in profit forecasts for a BoJ survey released last month.
Stock markets across Asia reversed yesterday’s gains falling on concern over the strength of the US economy. The MSCI Asia Pacific fell more than 1.5% as the focus moved away from the US debt ceiling to slowing global growth. The ASX 200 reversed yesterday’s gains to fall 1.43% to 4,434 with a relatively dovish RBA commentary on the economy adding to the downward pressure. The Nikkei is down 1.21% to 9,845 while the Hang Seng is lower by 0.73% to 22,498. Four shares fell for every one that rose in Asia. The Shanghai Composite slumped after xinhua08.com said rates would increase in China this month citing its own research.
Commodity prices apart from the precious metals eased today as risk aversion remains a strong theme in the markets despite the US debt ceiling negotiations heading to an inevitable resolution on the August 2 deadline. Crude oil has eased more than 1% from the highs to close the Asian session at $94.50. Gold and silver rose while continuing to trade within now familiar ranges. Gold is trading at $1,623 with silver at $39.70. Soft commodities were slightly firmer while copper was flat for the day. Tonight, look out for the high impact Swiss Retail Sales and UK Construction PMI.
