Neutral RBA Statement | Current Sentiment

Our trade call is to buy AUDNZD from 1.1152, which is just above the 50% retracement for the recent 80-pip rally. The reasons for the trade are lower Business Confidence from New Zealand and a neutral RBA statement. The results of today’s GDT auction could effect conviction in this trade so those numbers should be monitored in context.

Current Sentiment:

The main event for the Asia-Pacific session was the RBA’s rate decision and statement. The rate was left at 2% as expected and the statement was similar to prior ones, except added commentary about a higher AUD which could complicate the adjustment underway in the economy. The RBA remains prepared to ease further should that be appropriate to lend support to demand, however the currency remains relatively neutral in terms of monetary policy. With few surprises in the statement, and lingering negative sentiment on commodity currencies given the recent fall in WTI of over $6 from highs, the Aussie rallied 60 pips from lows but soon retraced most of the move. AUDNZD rallied 80 pips from lows and remains near session highs as the Kiwi stays on the back foot.

Earlier in the session, the New Zealand Institute of Economic Research’s index for Business Confidence fell to 2 – the lowest since July 2012. Kiwi is down 180 pips from last week’s highs.

Trade Balance figures from Australia showed a larger than expected deficit of $3.41b.

Oil remains near its recent lows and commodity currencies look pressured heading into the session. The market is becoming increasingly doubtful about any meaningful result from the upcoming OPEC and non-OPEC meeting to freeze outputs – given recent rhetoric from Saudi and Iranian oil ministers.

The Nikkei is down 2.6%.

Ahead we have German Factory Orders and Services PMIs from throughout Europe, most notably, the UK.

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