RBA Cut Key Rate to 2.5% Still AUDUSD Gains Ground - 6.8.2013

The Reserve Bank of Australia cut key rate by 0.25% to a new record low at 2.50%. At its statement the RBA though did not sounded as dovish as expected providing some support for its currency. More specifically Glenn Stevens said that growth has been a bit below trend over the past year, unemployment rose while inflation remained low providing space for rate cut. Lastly said for forward guidance, the policy would be adjusted as needed to foster sustainable growth after assessment of the outlook with inflation consistent with its target. Indicating that RBA does not plans to ease further this level of accommodation. Still, market participants have been expecting more dovish comments by RBA and that could explain AUDUSD advancement from 0.8904 to 0.8988. In contrary Aussie Trade surplus was at 600 million in June, lower than expected but higher from previous month trade surplus, while House price Index surprisingly increased by 2.4% in June from 0.8% the previous month.

The greenback was weighed by rumors that traders start to doubt for the reduction of FED asset purchases in September due to weaker job creation in July. Specifically the US dollar index retreated to support at 81.71 but then recovered and currently is trading at 81.90. Same story with the USDJPY who dipped to downside hurdle at 97.85 and then rose back at 98.55. All that affected by Asian shares negative trading, like Hang Seng falling by 0.97% due to US indices weaker trading, giving a lift to the Japanese Yen but then risk sentiment improved as RBA cut key rate.

Elsewhere, the British pound strengthened versus the US dollar as Services PMI rose to 60.2 for July, up from 56.9 the previous month and well above estimated 57.4 reading. There is a key resistance around 1.5400 and could limit recent upside momentum, at the moment the GBPUSD is steady between 1.5377/1.5315 ahead of Manufacturing and industrial Production data releases.