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RBA May Hold Its Rate Cut Decision Over - 16.7.2013

The US dollar lost some ground vs. major counterparts on Tuesday morning. This is partly due to the increase in retail sales in the USA by 0.4% thаt is less significant than the expectations of growth by 0.8%. In part it is simply because market participants are not in a hurry to open long positions before the Fed Chairman, Ben Bernanke’s speech in the Parliament, whose tone seemed too dovish during the previous speech. However, tomorrow speech of the Chairman should reflect the regulator policy vision as a whole thing, not only his personal expectations. In this regard, we do not think that the expectations of reducing the asset purchasing program in the upcoming autumn of this year, will significantly change, and therefore the relative weakness period for the US dollar, seen last week, shell be ended sooner or later.


The Australian dollar was able to finally find support after falling to almost 3-year low at 0.8998. The July RBA meeting minutes were published today, stating that the current monetary policy is appropriate for the current economic situation. In this regard, market participants partially had their expectations of further interest rate cuts by the Bank lowered. The Australian dollar approached 0.92 against the US dollar at the European trading session beginning.


This afternoon, we are waiting out for a large block of the statistics on inflation in June. Firstly from the United Kingdom, then the Euro zone data come out, and later in the evening, the United States data strike. It would be reasonable to note that some increase in consumer prices is expected in the UK, and it traditionally indicates less room for the CB maneuver. It is not exactly clear yet, what policy direction will be chosen by the new BOE Chairman, Mark Carney. The economy is definitely going through hard times - the economy grew by only 0.3% in the first quarter, with inflation at an average is 2.7% in 2013, while the BOE target level is 2%. In this regard, the British pound rose above 1.51 against the dollar at the beginning of the European trading session. But until the pair brakes through the psychological threshold at 1.52, we hold to negative short-term expectations.
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