Monetary policy minutes in focus
The AUD will be back in focus today ahead of the RBA’s monetary policy meeting minutes from the June 3 meeting. In the statement the RBA highlighted the exchange rate remains historically high, particularly given the further decline in commodity prices. However, given the local economy is looking to rebalance away from the mining sector dependence, perhaps this notion will slowly start to change.
Additionally it seems the moves in AUD/USD recently have been to do with low US yields. As a result, it is hard to position on RBA rhetoric alone. Most analysts feel RBA intervention is unlikely anytime soon. From a rates perspective, an increasing number of analysts are abandoning rate cut calls with Macquarie being the latest one to do so. Macquarie has moved from expecting a Q4 rate cut to a rate hike in Q1 of 2016.
Another flat open for the ASX 200
Ahead of the local market open, we are calling the ASX 200 down a couple of points to 5410. A slight positive is the fact the market managed to recover from the lows yesterday and finished the day in the black. This is generally encouraging as far as momentum goes. However, no doubt focus will be on the further slide in iron ore prices to 89. This will be the first time iron ore has traded below 90 since September 2012 when we went on to test a low of 86.70.
FMG recovered yesterday after announcing a $275 million investment in ships and some bargain hunting after testing $4. However, AGO is yet to see a bottom and just continues to struggle to find its footing. Gold miners might give back some of their recent gains today after the pullback in the precious metal. Worley Parsons had a great day yesterday on the back of a JP Morgan upgrade and its energy exposure. Traders could look to eye $17.50 in the near term as it is the resistance from the November 2014 gap.