We saw European and US markets clawing back gains on Monday, after last week’s losses.
Catch-up action could partially explain the positive equity performance in Europe as most of the region was closed on Friday for Labour Day.
In the currency market, the USD manages to grind higher against the majors, helped by fresh expectations that the Fed rate hike in the second half of this year is back on the table after good employment numbers last week.
EUR dipped towards mid-1.11. The greenback resurgence could put Asian currencies under pressure today.
While we expect some of the pick-up in overnight risk sentiment to carry over to Asia, thin liquidity could deter traders with Japan still away, accompanied by closed markets in South Korea, Malaysia and Thailand. In Singapore, there are some focus on a pair of earnings report from Noble Group and SIA Engineering.
Ahead of Asia open, we are calling the CSI300 4784 +3, Hang Seng 28325 +225, Nifty 8328 -3, and MSCI Singapore Free 391.91 +0.2.
Focus on RBA
Today’s focus is on the RBA where the central bank will announce its May policy decision. The market is now aligned with economists’ predictions and expects the RBA to reduce its cash rate by another 25bps, to 2.00%, after being rather undecided last week.
Nonetheless, we can still see plenty of uncertainty among traders judging from the price action in AUD. This suggests that we would see a high degree of volatility in the Aussie with either decision (rate cut or hold). If the RBA decides to cut rates and issues a dovish statement, AUD/USD could slip below $0.7600. The pair is likely to strengthen and target the $0.8000 area if a rate hold materialises.