RBA Stays on Hold
The RBA kept its policy rate on hold overnight, fully in line with expectations. The central bank also kept its easing bias, and while immediate price action suggests some investors were positioned for a more adverse outlook, the currency had already been performing well in the run-up in what has been a sluggish session overnight in Asia. Overnight, new BoJ Governor Kuroda was also on the wires, noting that the BoJ will do ‘whatever it can’ to beat deflation and conduct ‘bold easing’, though it may take 2 years to achieve its new price target. Much of his rhetoric is not new and markets are still assessing how he can surpass expectations at this week’s BoJ meeting and arrest the JPY’s recent gains. With Europe returning from holidays today, much of the emphasis will be on data prints, especially with the crucial ECB decision on Thursday where some parts of the market expect a cut to be on the agenda. Consensus surveys are certainly not unanimous in expecting unchanged rates. Draghi’s own personal views on the handling of Cyprus will also be under scrutiny. Ahead today, PMI manufacturing figures are due in Germany and elsewhere in the Eurozone. Overnight EURUSD traded 1.2840-1.2878 and USDJPY 92.57- 93 .33.
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UBS