Daily FX Trading Review: RBA Keeps Rates on Hold at 2.50% – Sept 2, 2014

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Daily FX Trading Review: RBA Keeps Rates on Hold at 2.50% - Sept 2, 2014

The comdolls weakened to the dollar but advanced against the yen in recent FX trading. Data from Australia was weaker than expected yesterday, as company operating profits slipped by 6.9% in the previous quarter and commodity prices marked an 11.5% decline. Building approvals saw a 2.5% jump while the previous figure was revised to show a smaller decline. The RBA decided to keep rates on hold at 2.50% as expected, citing their projected period of stability in interest rates again. There are no other major reports lined up from the comdoll economies today.

The US dollar recovered to most of its major counterparts in recent FX trading sessions, despite the lack of top-tier data from the US economy yesterday. US banks were closed in celebration of Labor Day then, with economic data releases set to resume today. ISM manufacturing PMI is due and it might show a dip from 57.1 to 57.0, which would reflect a slight downturn in the industry expansion. Market participants are also likely to pay closer attention to the labor component as this might provide clues for the upcoming NFP release.

FX Trading Fundamentals

The euro resumed its selloff to its FX trading counterparts, as data from the euro zone came in weaker than expected. Spanish manufacturing PMI fell from 53.9 to 52.8, lower than the estimated 53.4 reading, while the Italian manufacturing PMI showed a contraction at a reading of 49.8. Spanish jobs data is up for release today and a 25.5K increase in joblessness is eyed. Weaker than expected results could lead to more euro weakness as traders price in expectations of a dovish ECB statement later in the week.

The pound edged slightly higher recently but was unable to hold on to its FX trading gains when the manufacturing PMI came in weaker than expected. The reading fell from a downgraded 54.8 to 52.5, indicating a slowdown in industry expansion. Construction PMI is due today and another decline might be seen, which could push the pound much lower ahead of this week’s BOE interest rate decision.

The franc resumed its recent FX trading decline to the dollar, as Switzerland’s SVME PMI fell short of consensus. The figure fell from 54.3 to 52.9, reflecting slower industry expansion. Swiss GDP is up for release today and a 0.5% growth figure is projected, with a lower than expected reading likely to push the franc much lower.

The yen lost ground in recent FX trading as traders continued to price in the odds of hearing downbeat remarks in the BOJ interest rate decision. Data from Japan kept disappointing market watchers, as the latest monetary base report turned out weaker than expected. Average cash earnings saw a 2.6% gain though, stronger than the projected 0.9% uptick while the previous reading enjoyed an upgrade.

To contact the reporter of the story: James Brennan at james@forexminute.com

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Samuel Rae is an active retail trader across a variety of assets, including currencies, stocks and commodities and the author of Diary of a Currency Trader (Harriman House). His personal strategy focuses primarily on classical technical charting patterns with a fundamentally supportive bias, combined with a strict, risk management-driven approach to entries and exits. He is an Economics graduate from Manchester University, UK.