Asian opening levels were similar to yesterday and it took the RBA minutes to stir up some action.
The minutes held few surprises from the post-meeting statement but did reinforce the notion that the RBA is in no rush to cut rates in the near-term and this lent support to the AUD. The RBA noted that the full impact of past rate cuts had yet to be felt though there were signs of improved activity in those areas of the economy not directly related to the mining boom. It still sees mining investment accelerating into 2013/14 with a gradual decline thereafter. It still saw tentative signs of Chinese growth stabilizing at more sustainable levels while it also noted a noticeable pickup in business credit growth over recent months.
On the AUD, it said the currency was near a post-float high on a trade-weighted basis and at high levels despite softer commodity prices and a weakening global outlook. It attributed the strength to offshore demand for Australian government debt, noting that the SNB had bought a “modest amount” of AUD versus the EUR as part of its reserve re-allocation following EURCHF intervention. There was no discussion on how members felt about the level of the AUD or on any options to force it lower. We can perhaps expect more comments/insight when the RBA governor undertakes his semi-annual testimony on Friday. AUDUSD edged 20 points higher post-minutes while AUDJPY matched it with similar gains.
Today’s Wall Street Journal had a different view on China resource demand and as a result the Australian economy. Its headline announced that Australia’s resource boom is losing momentum at a rapid pace as demand from China cools with several projects recently cancelled, mining companies laying off workers and mothballing equipment until metal prices rise. You can read the article here.
Yesterday, the ECB eventually voiced its displeasure at the weekend report by Der Spiegel on capping periphery EU bond yields, saying it was misleading to report on decisions that had not been made. Separately, the Bundesbank was particularly critical of the ECB’s potentially unlimited bond purchasing program. The bank stated that the purchases are to be “seen critically and entail significant stability risks”, and that such decisions should be made by national governments or parliaments, not by central banks. The EUR retreated once the comments were announced, dipping just below 1.23 versus the US dollar before a mild rebound. Elsewhere, currency pairs were confined to Friday’s ranges with EURUSD capped by the 50-day moving average, GBPUSD stuck below the 200-day moving average and USDJPY sandwiched between 100- and 200-day moving averages.
Light data flow was the order of the day with the US session featuring only the Chicago Fed activity index. This improved to -0.13 (the best since April) from a downwardly-revised -0.34 in June and this helped prevent any serious fallout on Wall Street. Apple shares hit a new high making it the most valuable public company of all time resulting in the Nasdaq slipping a mere 0.01 percent. The DJIA and S&P closed -0.03 percent and flat respectively.
Data Highlights
US Jul. Chicago Fed Activity Index out at -0.13 vs. -0.05 expected and revised -0.34 prior
NZ Jul. Credit Card Spending out at -1.5% m/m, +0.1% y/y vs. revised 0.7%/3.9% prior resp.
NZ Q3 RBNZ 2-yr Inflation Expectation out at 2.3% vs. 2.4% prior
Upcoming Economic Calendar Highlights
(All Times GMT)
JP All Industry Activity Index (0430)
JP Dept. Store Sales (0530)
Swiss M3 Money Supply (0700)
UK Public Finances (0830)
UK CBI Trends Total Orders (1000)
UK CBI Trends Selling Prices (1000)
CA Wholesale Sales (1230)
US Fed’s Lockhart to speak (1245)
Andrew Robinson,
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