RBA Meeting Minutes Pave Way for More Rate Cuts
The Reserve Bank of Australia released its meeting minutes last night, confirming its dovish stance. The 25-basis-point rate cut was a conservative one and the bank will likely keep slashing in light of slowing demand in the economy and the increase pressure the global financial system is facing in light of the recent headlines involving Lehman Bros and AIG.
AUD/JPY - Aussie Slides vs Yen on Risk Aversion, Minutes
The market is pricing in another rate cut by the RBA. The minutes provided another confirmation that the bank is more concerned about the slowdown in growth. The AUD/JPY dropped almost 300 pips overnight until hitting 81.40, where it started to reverse the losses. Much of this fall was a continuation of risk aversion in the Forex markets. By 3:30PM the pair was back to trading near 84.50.
GER CPI Matches Forecast, Down -0.3%
In the European session, the final version of German CPI for August stuck to the estimate of -0.3%. On the year, inflation eased to 3.1%. The major culprit was a strong fall in energy prices as oil tumbled during the month.
EUR CPI Down -0.1%
In the Euro-zone as a whole, CPI on the month was revised slightly up to -0.1% from -0.2% in the preliminary release. These numbers suggest that inflation may have peaked and alleviates some of the pressure on the ECB to hike rates in order to combat inflation.
EUR ZEW Economic Sentiment Surprises on Upside
For September the German and Euro-zone ZEW Economic Sentiment Indexes, which measure attitudes of financial professionals in those areas, improved to -41.1 and -40.9 respectively. That was close to a 15 point improvement in both indexes and surprised forecasts on the upside. Still, the levels remain weak, though the Euro-zone can use any good news at this point.
UK CPI Inflation Heats Up to 4.7% in August
Consumer inflation in the UK, unlike in other developed nations, did not ease during the month of August. Instead, the monthly CPI rose 0.6%, slightly above the forecast and on the year inflation jumped to 4.7%. That's the highest annual rate in 11 years.
EUR/GBP - Euro Gives Up Earlier Gains vs Pound
The EUR/GBP traded within its recent range as the Euro rallied overnight against the pound, bringing the pair from support to resistance. The price move came despite signs that inflation has peaked in the Euro-zone, but is persistent in the UK. After hitting the resistance at the NY open, the pair started declining and reversed all 60 pips of the overnight rally.
US Consumer Inflation Down 0.1% in August
The US also came out with consumer inflation data. CPI declined 0.1% on the month in August, and is now running at an annual pace of 5.4%. Both came in below expectations which eases the pressure on Fed officials to guard against higher prices. Excluding food and energy, inflation was up 0.2% on the month.
US FOMC Holds Rates Steady at 2%
The Federal Reserve held rates steady at 2%, trying to inject some calm amid the financial storm that is raging this week. The statement cautioned about risks to both growth and inflation, and ignored calls to lower the rates as a result of the most recent bout financial turmoil.
USD/JPY - Dollar Recovers After Testing 103.50
US stocks on Tuesday posted modest gains in afternoon trading even as worries spread about the financial stability of insurance giant AIG. Hopes were lifted by reports that the Federal Reserve would intervene to prevent a possible collapse, which overshadowed the FOMC meeting later in the day. The Dollar-Yen pair hit a low near 103.50, following the NY open but managed to recover as stocks turned positive. Oil fell again today, declining $3.50 to trade near $92 a barrel.
USD/CAD - Greenback Hits Resistance at 1.0750
The US Dollar-Canadian Dollar pair has been pivot trading this session. After trading between the 1.0670 - 1.0710 range for most of last evening and the night, the pair rallied to the next range between 1.0710 - 1.0750. After the FOMC announcement, it dropped back into the lower range.
Releases Tonight and Overnight
Tonight Australia will release its WMI leading index while the Bank of Japan decides on rates. Overnight, the UK releases its Claimant Count, and BOE Meeting Minutes, along with its CBI industrial trends orders. Switzerland meanwhile posts its ZEW measure of expectations.
Tomorrow's Releases
Continuing overnight the Euro-zone releases its trade balance. Tomorrow, the US reveals housing data along with its current account, while Canada releases a measure of foreign flows.
Capital Market Services, L.L.C.
www.cmsfx.com
©C2004-2005 Globicus International, Inc. and Capital Market Services, L.L.C. Any information in this report is based on data obtained from sources considered to be reliable, but no representations or guarantees are made by Capital Market Services, L.L.C. with regard to the accuracy of the data. The opinions and estimates contained herein constitute our best judgment at this date and time, and are subject to change without notice. Capital Market Services, L.L.C. accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this report. No part of this report may be reproduced or distributed in any manner without the permission of Capital Market Services, L.L.C.
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