Muted reaction to Glenn Stevens’ speech

The AUD has been a talking point in Asia today as RBA Governor Glenn Stevens testified before the House Economic Committee.

While most of the investment community expected to hear some jawboning by Stevens, this did not materialise and as a result, AUD/USD held steady at around 0.91.

Stevens acknowledged that the AUD remains historically high but then reinforced that the low rates will help the economy to gradually improve and that we will go through a period of stable rates.

With that in mind, it doesn’t seem like the RBA meant to switch to a more dovish bias following its statement on Tuesday. Instead a neutral bias has been maintained and this will be a positive for the AUD in the near term, particularly after a string of positive economic releases this week.

AUD/USD could be looking to challenge overnight highs in the 0.911 region, a break of which will open it up for a move to December highs. China will release trade balance and CPI data over the weekend and this along with the non-farm payrolls report will help shape sentiment for Monday. January’s trade balance reading was a monster $31.86 billion and it is now expected to drop to $14.5 billion. 

Euro approaching December highs

The ECB decision was perhaps the main event of the overnight session where the central bank decided to remain on hold.

With the market mostly positioned for a dovish outcome from the meeting/press conference, the single currency rallied to its highest for the year against the greenback on the news. Mario Draghi said the region will continue to see a modest recovery and felt they were on track to reach their forecasts. On inflation, Draghi said there will be a prolonged period of low inflation before a gradual pickup.

EUR/USD traded as high as 1.387 and is within striking distance of the December 27 high of 1.389. There are no major releases on the Euro front today and focus is expected to be on the USD side of the equation, with non-farm payrolls due out. A strong improvement to 149,000 (from 113,000) is expected.


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