Good morning traders,
Yesterday’s trading day was not far from our predictions on the Australian Dollar (AUD). The currency was fighting a losing battle as it prepares itself today for the policy meeting held by the Reserve bank of Australia (RBA). The forecast is that the RBA will be cutting the official cash rate by 25bps bringing this to 2.00%. Another report preventing the AUD from benefiting from the Chinese economic data, this comes about due to the RBA looking to loosen monetary policy this month.
The other big Macro news that emerged from China yesterday from their manufacturing sector, China’s manufacturing PMI remained on a low in February. The index rose by 0.1 which was better than expectedand exceeded the market anticipation. Further to the positive news from Asia, the HSBC had also released its Manufacturing PMI for February which too yielded higher than expected data. In spite of the positive news from Asia today, the AUD / USD took a huge knock yesterday, due to the above mentioned meeting by RBA. Perhaps things will look better later today.
The not so ‘quite out of the woods’ Euro has found some peace on the back of the stronger than expected data released by the Eurozone. Even though the EUR remained low and still was on the decline, it did manage to keep its head above water slightly higher than predicted. There is a year by year drop in the Consumer Price Index (CPI) in the 19 nation currency, the drop is by 0.3%. This was a good improvement compared to the reading that was taken in January 2015 sitting on 0.6% also beat expectations of 0.5%. To add to the strength of this currency, the unemployment rate was down by over 11.2% in January and now sits at 11.3%. Yesterday also released mixed data from the UK which made the EUR / GBP close on the upward bullish trend. Disappointing data from the UK did propel the EUR to better numbers.
Even though the EUR on the whole is still not meeting standards, this price should and may just dwindle at this level for the rest of the week or increase its gains as the European Central Bank holds a meeting on Thursday. As the European Central Bank (ECB) will begin QE this month, the EUR may just find the boost and support it very much needs as the ECB announces a few surprises.
Friday saw the EUR finishing the trading week on a low note and the EUR / USD fell to its lowest level in a month, trader sentiments were already banking on a low reading. However, the Eurozone turned this around. Weak personal income and spending data from the US may further strengthen the EURO this week.
Today’s trading tip
The feeling I have is that the USD will still gain and move from strength to strength today. Having said that I also have a positive sentiment that the EUR will also gain even if it is slightly. The PUT today will be on the AUD / USD.