RBA Leaves Rates Unchanged, CAD IVEY PMI Could Cement Bottom in USD/CAD

The Australian, New Zealand and Canadian dollars rebounded thanks to stronger economic data and steady oil and gold prices. Even though the Reserve Bank of Australia left interest rates unchanged at 6.25 percent and the country?s Service Sector PMI index dropped from 56.1 to 54.9, the sharp improvement in the trade balance caught the entire market by surprise.

The market was looking for the deficit to increase from -916M to -1.2B, but instead it decreased to -807M. Despite the strength of the Australian dollar, export demand increased in the month of May. The details of the report indicate that the export growth was mostly due to demand from the Middle East because demand from the US actually dropped due to the rising Australian dollar. Canadian building permits and IVEY PMI are due for release on Thursday. The risk is to the downside for both reports given recent weakness of data.