Muted reaction to RBA minutes

All of a sudden it’s as if last week never happened and sentiment has stabilised on the back of a much better-than-expected retail sales print. 

Retail sales came in at +1.1% (versus 0.8% expected), while the core retail sales reading (ex-auto) was up 0.7%. This was risk positive and helped risk appetite improve. Ukraine tension still kept a lid on gains with the Ukraine central bank raising the benchmark interest rate by 3% to 9.5% to arrest the slide in the hryvnia.

While the USD was a touch firmer, it still struggled against the AUD, which remained bid heading into the RBA minutes at 11.30am AEST. The line most analysts were looking for was around the strength of the currency and if the RBA was going to make comments around what levels it is looking for the currency to trade. The minutes showed most members felt the AUD remained high by historical standards and a lower rate would be required to achieve balanced growth. However, this is nothing new and the market would have probably wanted to hear something a bit more specific on the jawboning front.

China data and Fed speak in focus

As a result, the early dip in AUD/USD below 0.94 has found some buyers and the pair is now a touch above 0.94. It is hard to decipher a trade from this statement, but there could still be more to come in Asia with the RBA's Debelle giving a speech on the Australian bond market a little later in the day. And we continue to await China's money and credit data for March. To the upside, the high from April 10 of 0.946 will be the level to look out for in the near term. On the USD side of the equation we have a raft of releases later today including CPI, Empire State manufacturing index and a speech by Fed chair Janet Yellen. Fed members Plosser and Kocherlakota will be also on the wires.     

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