ECB Leaning Toward 3-Year Purchases, RBA on Deck

The euro climbed after Draghi solidified expectations that officials are putting together a comprehensive bailout plan. The pound sterling was the best performer while AUD and NZD lagged. The RBA is expected to leave rates at 3.50% in the upcoming session. See the latest from Fridays Premium Insights below.

Draghi spoke in a closed-door session at European Parliament but news organizations received an audio-recording of the meeting where he said periphery bond buys would be legal under the ECB treaty, even out to three years.

The euro rallied after the headlines, climbing as high as 1.2611 from 1.2575. German Fin Min Schaeuble also added to the optimism, saying he is sure the German constitutional court will approve the ESM bailout mechanism.

Overall, the session was very quiet due to holidays in North America.

At 0430 GMT, the RBA cash target is expected to remain at 3.50%, where it has been since June. Economists are unanimous in saying there will be no rate cut but the OIS market is pricing in a small chance. The market will also look for a more explicit dovish shift and comments about the Chinese economy.

Earlier, at 0130 GMT, Australia is expected to announce a current account deficit of A$12.2 billion for the second quarter. At the same time, Japanese labor cash earnings are expected to decline 0.5% for July.

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-AB