Reserve Bank Of Australia Holds Rates At 2.25{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}, No Rate Cut Announced, Currency Rallies Today.
There was the election debate by the end of Thursday and it concluded with little by the way forward. The polls seems to suggest pretty much that David Cameron will come out somewhere with Ed Miliband and Nigel Farage. The polls since then had continued to be fairly positive for the conservatives, which is certainly not doing the Sterling any damage as a direct result of that at the moment and that obviously we’ll see as we get closer and closer to the elections. There were no winners out of the debate in my opinion, the Nationalist Party of Wales and Scotland came across fairly well, despite obviously having fairly discrete agendas.
Aside of that, we had the Non-farm payrolls, showing some slightly weaker lower than expected initially claims. That data was slightly better for the United Sates than expected on Thursday and that was followed by the complete opposite, a much worse non-farm payrolls, i.e. 126k against 246k expected. This is slightly roughly half the job added compared to the expected, and certainly a lot worse than the last three months.
It pretty calls into question what the non-farm payrolls data is showing with the unemployment rate remain the same at 5.5{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}. There’s no real change from that perspective, but there are then questions around participation rate, exactly what the number mean and what it all means for policy. The likelihood is that in my opinion, we’re going to see rate move in the other headwinds we’ve got over the course of June and it all gets pushed back towards the end of the year.
We have a couple of Fed speakers this week and the Fed minute at the end of the day on Wednesday and that’s what we’ll be looking forward to on that side. On the Sterling side we’ve got very little event risk this week, with the market services PMI out today; expected to again show growth expansion at the 56/57 level in line with where we were last month. PMI data across Europe is expected and again we’ll expect those to show a little bit of expansion as mirroring the data we saw last week.
Aside from that the Bank of England decision is billed for Thursday, no change is expected from there, so again it’s likely to be a bit of a non-event. I think everyone is just getting back into the market this week and really reassessing where everything is from the UK, US and Europe respectively.
The big news overnight was for the Aussie dollar, with the Reserve Bank of Australia holding rates at 2.25{01de1f41f0433b1b992b12aafb3b1fe281a5c9ee7cd5232385403e933e277ce6}, nearly half of thirty economic polls expected them to cut which they didn’t, but the talk and forecast are that we’ll see a cut next month (beginning of May) and as a result we can see the Aussie dollar bounce quite strongly against the dollar and pretty much everything as one may expect. The bank has judged that it was the right action to take at this time in view of holding rates.
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