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Retail sales came in below expectations while the Empire State manufacturing index and business inventories came in ahead of consensus. The mixed US data kept the USD at bay and supported the risk space. Risk also brushed off a downgrade to the European Financial Stability Facility (EFSF) by Fitch to AA+.
AUD/USD managed to come off its lows in the 0.90 region and is now hanging around 0.91 with China’s economic data not quite managing to spark the big move that markets were expecting. Today we have the RBA monetary policy meeting minutes due out at 11.30am. While no major surprises are expected given the brief statement from the last meeting, Glen Stevens throwaway line will be the main point of focus, and the market will want to see if the decision not to cut rates in July was close. If that’s the case, then we could see renewed selling in the AUD. However, if it’s a situation where the decision wasn’t close at all and it’s the same old wait-and-see approach then this could possibly result in a near term squeeze higher for the AUD. Should this be the case, we feel targets would be around $0.92 before renewed selling kicks in. To the downside, support is in the $0.90 region.
Elsewhere in Asia, Japan will be back in line today with USD/JPY recovering. USD/JPY managed to push back above 100 overnight to print a high of ¥100.49 but has since dropped back to ¥99.91. Any further yen weakness would support the Nikkei today with a big week ahead for Japan. Tomorrow we get the BoJ’s monetary policy meeting minutes then of course we have the Upper House elections over the weekend. Fed chariman Ben Bernanke’s two day testimony will be key for the USD and in turn USD/JPY and Japanese equities.
EUR/USD remains resilient despite the minor blip when the Fitch EFSF downgrade occurred. The pair is currently sidelined at around 1.306 and will be in focus later today, with the German ZEW economic sentiment due out. We also have European CPI and trade balance figures due out. Over in the US we have CPI, industrial production, housing data along with Fed member Esther George’s comments to look out for. All these metrics will be key for the greenback.