ll eyes in Asia were firmly fixed on the RBA rate announcement (and maybe Australian eyes also on the Melbourne Cup horse race 30 minutes later!).
The RBA announcement to leave rates unchanged at 3.25 percent was a mild surprise judging by the AUD’s reaction, even though sentiment was evenly split 50/50. The AUD popped up a quick 30 points versus the US dollar in a kneejerk reaction and extended its gains a while later. In its accompanying statement, which was perhaps more neutral than most had expected, the RBA noted that China growth had stabilized and the world economy was looking slightly more positive, though the risk for the global outlook was still tilted to the downside. They decided that policy for appropriate “for the time being” with inflation data coming in slightly higher than expected but seen consistent with target over the next 1-2 years. Terms of trade had declined about 13 percent since the recent peak though the AUD remains higher than expected.
Fed’s Williams, a noted dove and advocate of the Fed’s open-ended purchases, was on the wires saying that the Fed’s unconventional policies had boosted growth without creating unwanted side effects, including inflation. He added that the Fed would reverse its policies if excessive risk taking emerged, though this was not yet evident. He commented that Fed research had shown that the Fed’s QE1 and QE2 measures had trimmed 1.5 percent off the unemployment rate.
It was a session dominated by EUR weakness overnight with Spanish unemployment data showing an increase in the number of unemployed in October and unease regarding the Greek second bailout discussions the main factors behind the slippage. EURUSD did move below the 200-day MA for the first time since October 1 but lacked aggressive momentum to the downside and spent most of the session hovering just below the 1.28 handle. GBP underperformed as the UK services PMI hit its lowest level since December 2010 (though still holding above the key 50 threshold).
US data flows were limited to the ISM non-manufacturing which slid to 54.2 from 55.1 and disappointed expectations of a 54.5 print. Wall Street had a quiet session before the US election with small positives across the indices. The DJIA rallied 0.15 percent, S&P +0.22 percent and the Nasdaq +0.59 percent.
Green Moon won the Melbourne Cup.
Data Highlights
CA Sep. Building Permits out at -13.2% m/m vs. -3.0% expected and revised +9.5% prior
US Oct. ISM Non-manufacturing out at 54.2 vs. 54.5 expected and 55.1 prior
NZ Q3 Avg. Hourly Earnings out at +1.4% q/q vs. 1.0% expected and 0.2% prior
UK Oct. BRC Like-For-Like Sales out at -0.1% y/y vs. 1.3% expected and 1.5% prior
AU Q3 House Price Index out at +0.3% q/q, +0.3% y/y vs. 1.0%/0.8% expected and revised 0.6%/-1.9% prior resp.
AU RBA leaves rates unchanged at 3.25%
Upcoming Economic Calendar Highlights (All Times GMT)
JP Leading/Coincident Indicators (0500)
Swiss Consumer Confidence (0645)
UK Halifax House Prices (0800)
Sweden Service Production (0830)
GE PMI Services – Final (0855)
EU PMI Services/Composite – Final (0900)
UK Industrial/Manufacturing Production (0930)
EU Euro-zone PPI (1000)
GE Factory Orders (1100)
US ISM New York (1445)
CA Ivey PMI (1500)
US JOLTs Job Openings (1500)
UK NIESR GDP Estimate (1500)
Andrew Robinson,
SAXO BANK