European Open Briefing

Global Markets:

  • Asian stock markets: Nikkei and Shanghai Composite both lost 0.30 %, Hang Seng fell 0.05 %, ASX 200 down 0.10 %
  • Commodities: Gold at $1234 (+0.25 %), Silver at $17.70 (+0.05 %), WTI Oil at $53.20 (+0.30 %)
  • Rates: US 10-year yield at 2.39, UK 10-year yield at 1.31, German 10-year yield at 0.37

News & Data:

  • Australia ANZ Roy Morgan Weekly Consumer Confidence Index (W/E 05 Feb): 117.5 (prev 118.1)
  • Australia AiG PCI (Jan): 47.7 (prev 47.0)
  • UK BRC Sales Like-For-Like (YoY) Jan: -0.6% (est 0.8% prev 1.0%)
  • PBoC Fixes USDCNY Reference Rate At 6.8604 (prev fix 6.8606 prev close 6.8639)
  • Fed’s Harker: A March Interest-Rate Hike Is on The Table, Depends on The Economy
  • Harker: Still Supportive of Three Rate Hikes This Year
  • Harker: Don’t Want to Get Behind the Curve on Rate Hikes, Don’t Think We Are Behind Now

RBA Rate Decision:

  • Reserve Bank of Australia has left the cash rate unchanged, at 1.5%
  • Rising AUD could complicate economic transition
  • Global economy conditions have improved over recent months
  • Labour indicators have been mixed
  • Inflation expected to remain low for some time
  • RBA says Chinese economy stronger over H2 2016
  • House prices rising briskly in some markets
  • Medium-term risks to China growth remain
  • Inflation forecasts are largely unchanged
  • RBA says higher commodity prices have supported a rise in Australia’s terms of trade
  • RBA says CPI expecting to pick up over 2017 to be above 2 %
  • Return to reasonable GDP growth in Australia expected in Q4
  • Central scenario remains for economic growth around 3 %

Markets Update:

The Reserve Bank of Australia has decided to keep rates unchanged, as expected by the market. However, the central bank sounded slightly more bullish than anticipated. It said that it expects higher growth to resume in Q4 and that economic growth will be around 3 % over the next few years. Inflation still remains low, but the RBA thinks that it will rise above 2 % this year.

The Australian Dollar rose following the announcement. AUD/USD rallied from 0.7640 to 0.7680 and AUD/NZD from 1.0380 to 1.0420. The outlook for AUD/USD remains bullish and resistance at 0.77 should not be difficult to overcome. However, stronger resistance is then seen in the 0.7780-0.78 area.

The Euro declined in Asia amid fear of political risks. EUR/USD opened around 1.0750 in Asia and fell to 1.0705 later in the session. Should 1.07 support break, the next notable level is seen at 1.0620.

Upcoming Events:

  • 07:00 GMT – German Industrial Production
  • 07:45 GMT – French Current Account
  • 08:30 GMT – UK Halifax House Price Index
  • 13:30 GMT – US Trade Balance
  • 13:30 GMT – Canadian Trade Balance
  • 15:00 GMT – US JOLTs Job Openings
  • 15:00 GMT – Canadian Ivey PMI
  • 16:35 GMT – German Bundesbank President Weidmann speaks
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