AUD bounces as RBA statement shows no signs of panic on slowing Chinese economy
City Index September 4, 2012 2:15 PM
<p> EUR/USD It has been a quiet start to the week with US returning today following the Labor day holiday and the EUR/USD still managing […]</p>
It has been a quiet start to the week with US returning today following the Labor day holiday and the EUR/USD still managing to hold around the 1.2600 level with 1.2550 now seen as initial support and 1.2637 last week’s high as the near term resistance.
Draghi said yesterday that purchasing short-dated bonds doesn’t constitute state financing and he would be comfortable buying bonds with maturities of up to about three years. But he’s against turning the ESM into a bank as this would entail monetary financing of governments. This has got the market’s hopes up for an announcement on Thursday. Overnight Moody’s maintained EU AAA rating but changed outlook to negative, the outlook change shouldn’t come as a major surprise given that the EU’s key budget contributors, Germany, France, the UK and the Netherlands have all been assigned negative outlooks. Meanwhile Spanish media report that the regional government of Andalucía will request an “advance” of €1bn from the central government’s Autonomous Liquidity Fund, thus becoming the fourth Spanish region to request central government assistance.
The AUD bounced on the RBA statement that showed no signs of panic or stress to a slowing Chinese economy. Rates remained on hold as expected but the bears were disappointed as the RBA didn’t signal a possibility of a rate cut despite the Chinese and global growth concerns.
The key release later today is the US mfg ISM which is expected to come in at 50. The US economy is growing at a gradual pace and the USD is no longer driving currency markets. Instead, attention is on the ECB meeting on Thursday.
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