Intraday Market Thoughts

Eyes on the RBA as Aussie Rises

by Adam Button
Mar 25, 2014 21:56

The Australian dollar closed above the 200-day moving average for the first time in 11 months. It's kiwi cousin edged it out as the top performer while the Swiss franc lagged. Up later, two key members of the RBA are delivering speeches. 

AUD/USD rose to the highest since November in the fourth day of gains. The drivers weren't domestic but better risk sentiment underpinned the rally. The 200-dma has been an important marker in Aussie trading in the past so a squeeze on the crowded short trade is possible.

The euro was also in focus as the market attempted to decrypt commentary from ECB members. Makuch talked about taking decisive steps due to a higher risk of deflation but Visco sees no deflation risk just now. The euro tested 1.3750 but the level held and when Draghi offered nothing new, save for some weak anti-euro jawboning, the euro jumped nearly 100 pips from the lows.

The US economy was also in focus. The Richmond Fed was soft at -7 compared to +4 expected but consumer confidence rose to the highest since 2008 to grab the most headlines. The 82.3 reading was well-above the 78.5 expected and suggests a strong Spring recovery is on track. What's worrisome is that neither the dollar nor stocks were particularly impressed by the data point.

In the near-term, the risks for the Australian dollar are high. At 2230 GMT, RBA Depute Lowe delivers a speech and then 5 hours later its Stevens' turn. Certainly, the RBA leader won't be pleased with AUD strength and will use some words to talk it down but unless he talks about downside risks to inflation, it's likely to only be a passing event.

Aussie has been a much favoured currency in our Premium Insights over the last 2 months, with focus on AUDCAD, AUDUSD and AUDNZD. Bad news from China has not hit the wires in a while. Find out if we have changed our AUD bias, or are once again long or short the Aussie-and against which currency in our latest Premium Insights.
Act Exp Prev GMT
CB Consumer Confidence (MAR)
82.3 78.6 78.3 Mar 25 14:00
Richmond Fed Manufacturing Index (MAR)
-7 -1 -6 Mar 25 14:00

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