Hey Janet, why the worried look?
Friday saw USD Nonfarm Payrolls for March miss expectations (Actual: 126K v Expected: 246K). In the current environment where markets are waiting for a rate hike from the Fed, the question becomes does this put a dampener on the idea?
We are coming off a run of strong numbers and consensus is that this single report won’t necessarily influence the Fed’s tightening policy. It could however, weaken the argument for a mid-year hike.
This number is also important for the RBA to consider when they meet tomorrow in Sydney to decide whether to cut or keep interest rates on hold for another month. If the US raises rates, this will push the USD up, and in turn the AUD down which could be seen as having some of the RBA’s work done for them.
There is much more to consider for the Australian economy, but with a historically conservative Governor Stevens liking to take a wait and see approach, a surprise hold is now probably more likely than it was on Friday.
On the Calendar Today:
Another quiet one today with the Easter Monday holiday on the calendar for most major economies. We do get some Euro and US data later on in the night as everyone starts to get back from their holidays and markets return to normal trading, but overall it’s a quiet one.
All about looking forward and positioning heading into the RBA meeting tomorrow. Be careful as this could combine with low liquidity holiday conditions and we could get some spikes.
AUD Bank Holiday
CHF Bank Holiday
EUR German Bank Holiday
GBP Bank Holiday
EUR Spanish Unemployment Change
USD ISM Non-Manufacturing PMI
Chart of the Day:
Click on chart to see a larger view.
AUD/USD 4 hour:
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With not much on the calendar today during the Asian session, we look forward to tomorrow’s RBA rate decision. Keep in mind that futures are pricing in a more than 75% chance of a rate cut at tomorrow’s meeting.
After a FOMC inspired fake-out of the daily downward channel, price only reached the first level of supply just in front of the 0.8000 level and sellers smashed it back down. Price has now tucked back inside the channel and the fact it failed to break out of it with any conviction again on the back of the big NFP miss says that we’re more likely to be selling into the rate decision.
A test of the 0.7500 lows is on the cards for me. I’m always wary of what’s actually priced in when it comes to an interest rate decision on currencies, but going by the last cut that was expected, price still fell hard off the announcement before retracing.
I’ll be looking for a similar scenario to play out tomorrow if the expected cut comes and I see being short heading into the decision as the safer option.
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