A sharp slowdown in the Australian economic growth in the fourth quarter hurt the sentiment around the Aussie-dollar, knocking-off the AUD/USD pair to two-month lows near 0.7030. The Kiwi tracked the sharp decline its OZ peer and dropped to thee-week lows of 0.6754. Amid downbeat Aussie fundamentals and increased RBA rate cut calls, Asia witnessed softer risk tones, and hence, the Yen remained better bid against the US dollar near 111.80 levels. Meanwhile, the Cable headed back towards the 1.3100 support following the reports of the EU-UK deadlock on the Brexit deal yet again. The EUR/USD pair traded with a bearish leaning just under the 1.13 handle, as investors favored the greenback amid mixed Asian equities and China growth concerns.
On the commodities front, both crude benchmarks dropped nearly 1% ahead of the US EIA weekly crude supplies report while gold prices on Comex looked to regain 1290 levels amid moderate risk-aversion.
Main Topics in Asia
RBA’s Lowe says RBA has the flexibility to adjust MP in either direction
RBA Lowe: Q4 and Q3 GDP likely to show growth significantly below trend
Aussie GDP comes in as a miss of 0.2% Y/Y and a miss of 0.1% Q/Q (Aussie lower)
Australia: Online Retail Sales Index contracted -0.5% in January – NAB
Reuters poll: Brexit to be delayed to after March 29, say 51 of 54 economists
Australia’s Frydenberg: GDP showing some moderation
BoJ increases the amount of JGB buys to JPY 480 bn, Yen unfazed
BOJ’s Harada: Sales tax hike could cause a recession / weaken inflation
BoJ’s Harada: Will ease further if risks threaten price target
WTI Technical Analysis: Bears testing bull commitments at key trend-line supports
EU-UK struggle for Brexit deal in Brussels, talks to continue on Wednesday
UK’s Smith: Soft Brexit could be result if May deal rejected again – The Guardian
Gold: Bulls and bears spar around $1287
Key Focus Ahead
Heading into the European open, markets eagerly await the outcome of the further Brexit negotiations between Britain’s top government officials and the European Union (EU) Chief Brexit Negotiator Barnier, as both the sides try the last effort to clinch a Brexit deal. The fx space will be driven by Brexit updates, USD dynamics and the sentiment on the European equities amid a data-dry EUR calendar. However, the speech by the BOE MPC member Cunliffe’s speech will be eyed at 1215 GMT for some GBP moves.
The US ADP jobs report will hog the limelight pre-US open at 1315 GMT, soon followed by the US and Canadian trade data releases at 1330 GMT. The main highlight for the NA session today remains the Bank of Canada (BOC) rate decision that is due at 1500 GMT alongside the release of the Ivey PMI for February. The BOC is widely expected to keep the rates unchanged at 1.75% amid a cautious stance on the economic interest rate outlook. The CAD traders will also look forward to the EIA crude stockpiles data due at 1530 GMT for any impact on oil prices.
Later in the American mid-morning, around 1700 GMT, the speeches by the FOMC member Williams and BOE MPC members Saunders will remain in focus ahead of the Fed’s Beige book release at 1900 GMT and Aussie construction index data by AIG (due at 2130 GMT).
EUR/USD dips below 61.8% Fib support, eyes US ADP
A better-than-expected ADP could yield a deeper drop toward 1.1250, while a big miss on expectations could fuel a corrective bounce to the 5-day MA, currently at 1.1335.
GBP/USD struggles around a week’s low as EU-UK leaders jostle for soft/delayed Brexit
The results of the EU-UK leaders’ meet in Brussels could act as a frontline catalyst for the pair whereas trade updates and the US ADP employment change (expected 189K against 213K) could further validate the moves.
EURO Breaks 1.13, USD/CAD Eyes 1.34 – What to Expect from Bank of Canada
The focus shifts to the Canadian dollar with the Bank of Canada making a monetary policy announcement tomorrow. The Bank of Canada also has a lot to consider this month because while the labor market is strong the rest of the economy is weak.
BOC to retain its cautious, data-dependent stance – Barclays
In the view of the Barclays Research Team, the Bank of Canada (BOC) is expected to leave its benchmark interest rate unchanged at its monetary policy meeting due later on Wednesday at 1500 GMT.