TraderMade FX Research: Economic Observation 04/07
The US dollar is flat for the day still keeping its yesterday’s gains. AUD and SEK are the weakest among the G10 currencies after their respective central banks disappointed bulls. Otherwise, there is no real theme in the market and understandably so as the US is celebrating the Independence Day. In the equities space, the Nikkei closed down 0.12% at 20,032 and the European markets also opened lower with FTSE down 0.5%, DAX down 0.5% and CAC40 down 0.2% (though we have seen a slight recovery). In the energy space, the WTI front month is now trading within very narrow ranges, just under the $47.00 mark, after rising sharply yesterday.
Earlier, the RBA left the cash rate unchanged at 1.5%. There was no material change to the rates statement from last month, with no real signal to the change the policy rate anytime soon. AUDUSD sold-off as we suggested, however, we still hold a positive view on AUD over the medium-term.
Elsewhere, The Riksbank disappointed SEK bulls by sticking to a cautious tone, leaving the first rate hike to mid-2018 (same as before). That said, the Riksbank did remove the easing bias by stating that it is "less likely than before that the Riksbank will cut the repo rate in the near term". The GDP forecast for 2017 was lowered to 2.2% from 2.8% and inflation forecast for 2018 was also revised down to 2% from 2.1%. We may see some SEK weakness; however, the CPI next week will be in focus to show the way.
The Global Dairy Trade (GDT) prices will be due 1500 GMT with NZD vulnerable to a weak print. In terms of central bank speakers, ECB’s Praet and Mersch will be speaking at 1230 and 1740 GMT, respectively