The RBA kept policy rates on hold overnight, broadly in line with market expectations. The better-than-expected start to the year globally has probably given central banks in general more room for manoeuvre, but our economists note that the RBA has maintained a weak easing bias and is sounding more neutral at this stage – further policy projections will be contingent upon the employment situation, but for now there doesn’t appear to be a strong case to move. Continue reading →

The Australian dollar fell towards the end of the Asia session after Fitch downgraded the ratings of three Australian banks. Earlier, AUD got a modest boost from parliamentary testimony by RBA Governor Stevens who painted a relatively upbeat picture of the economic outlook. Crucially, he stuck to previous guidance and did not suggest the RBA is poised to cut the cash rate. Continue reading →

The Asian session was relatively quiet as markets consolidated further. BoJ Governor Shirakawa said that the latest easing measures were supposed to boost sentiment temporarily and a rise in prices won’t change policy. He also suggested that the BoJ will leave policy easy until the 1% inflation target is reached and that this view is backed by the 9-member board. Continue reading →

After marathon talks that extended well into Tuesday morning, a new bailout deal totalling the targeted EUR130 bn for Greece was finalised. Most of the deal’s components had been well flagged to the market, but the mere fact that negotiations did not fall apart helped stabilise sentiment and allowed EURUSD to keep a steady footing above 1.32. Although a significant hurdle has been passed and a disorderly default on March 20 appears to have been avoided, several points remain unresolved. Continue reading →

China’s unexpected weekend decision to cut the reserve ratio requirement by 50bp boosted risk appetite throughout the Asia session. The effect was magnified by the element of surprise. USDJPY scrambled higher to 79.89 but the rally was cut short when the Japanese trade deficit for January came in smaller than expected. Although China’s stimulus measure in itself is limited in efficacy and comes amid signs of a slowdown, the PBoC’s joining of the ranks of major central banks adding to easing will help to further stabilise economic conditions. Continue reading →

The euro extended its weakness during the Asia session amid concern over the failure of Eurozone authorities to secure an aid package for Greece before bond redemptions are due. In comments made after the Eurogroup conference call, Jean Claude Juncker merely said ‘decisions’ would be made at next week’s full meeting but it appears doubts remain over Greece’s ability to deliver. Continue reading →

China’s central bank governor Zhou said China would continue to invest in Eurozone sovereign bonds and would play a bigger role in solving Europe’s crisis via both the IMF and the EFSF. As usual, the comments were short on specifics, but they helped the euro recover from yesterday’s selloff, and carried AUD and NZD higher too. Zhou also expressed his wish that the euro will become a bigger and more important reserve currency. Continue reading →

Moody’s downgraded six Eurozone sovereigns overnight: Italy, Spain, Portugal, Malta, Slovakia, and Slovenia. The Aaa ratings of France, Austria, and the UK were affirmed but the outlook on each of these ratings was lowered to negative from stable. Cable dropped 60 pips over the course of the Asia session on the back of this news. Continue reading →

The Greek parliament voted in favour of a new package of austerity measures by 199 votes to 74 early on Monday morning. There were 27 abstentions. The euro got a moderate boost once the count got underway, but we saw no follow-through after the result was announced. In a sign of heightened political discord, 45 of the 300 lawmakers were expelled from their political parties for breaking ranks and voting against party lines. Safe passage of the legislation will go some way to alleviating market concerns after five Greek ministers resigned in protest on Friday. Continue reading →

The Eurogroup was not impressed with the inter-party agreement from Athens and late after the Eurogroup meeting yesterday Greek PM Venizelos was sent back to Athens with demands for deeper cuts. It appears that the EU finance ministers are not prepared to sign off the deal until they get a stronger sense that Greece will actually push through with its pledges. Continue reading →

The Greek negotiations appear to be moving into the final stages as Eurogroup chairman Jean-Claude Juncker announced that a press conference is scheduled for 18.00CET on Thursday, after the Eurogroup meets. The Greek Finance Minister is due to travel to Brussels today to agree on terms, but he admitted that there are still outstanding issues ahead of today’s discussions. Continue reading →