Australian dollar coin
A one Australian dollar coin is seen in this picture illustration taken in Sydney, Australia, July 29, 2015. Reuters/David Gray

Bell FX Currency Outlook: China cut its RRR by 0.50bps pushing the AUD to a high of 0.7168. The RBA Board meeting is the main event today.

Australia: China eases policy, reducing the Reserve Ratio Requirement to 17% effective 1 March amid capital outflows and softening economic activity. This cut will add RMB650bn into the banking system, alleviating the liquidity drain. It is the first cut since October 2015 and comes ahead of a key meeting later this week where the government will unveil its economic targets for the year. Trading remains very cautious on the AUD ahead of the RBA and China PMI today. Whilst rates are expected to remain on hold the accompanying statement is expected to be AUD negative given the AUD’s ongoing strength.

Majors: Two sets of U.S data reading only managed to stall the USD briefly. Despite the large fall in the Chicago PMI and much worse US pending home sales. The Euro remains on the back foot, falling through
1.0900 and back into deflation, on another weak EZ inflation read. Weaker than expected EZ flash CPI served to highlight the divergent paths in European and U.S inflation. This will increase pressure on the ECB to
ease policy next week. Despite ongoing “Brexit” fears, the GBP was able to benefit at the Euro’s expense. The highlight this afternoon should be the US manufacturing ISM survey and the UK manufacturing PMI. Today
is also ‘Super Tuesday’ and where we may end up closer to knowing the identities of both the Republican and Democratic presidential election nominees following the outcome of 13 state caucuses or primaries.

Economic Calendar 01 MAR

  • AU Building Permits Jan
  • AU RBA Interest Rate Decision Mar
  • CH NBS and Caixin Manufacturing PMIs Feb
  • US ISM Manufacturing PMI Feb

Bell Fx

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