Bell FX Currency Outlook: The Australian Dollar remains under USD 1.0300 this morning following the Reserve Bank of Australia's surprise announcement to cut the official cash rate by 0.25% yesterday to 3.25%, a level not seen since March 2009 and only 0.25% above "emergency" levels set late 2008 during the GFC.
Australia: Although the majority of Australian economists expected interest rates to remain unchanged, the RBA decided it was time to cut. The AUD started to feel the downside pressure late yesterday and then through the night fell below USD 1.0300.
Governor Stevens noted the deteriorating global economic outlook was a key reason for the further easing in policy citing "the outlook for growth in the world economy has softened over recent months' and 'risks to the outlook are still seen to be on the downside".
He further explained that his expectation for inflation levels to remain low and a greater uncertainty about the near-term prospects for the Chinese economy was "greater than it was some months ago".
Moreover, the RBA has revised the timing of the resources peak to 2013 and stated the expectation of the "level of the peak may be lower than earlier expected".
This brings the focus, for the RBA, on the path of the economy once the mining investment boom begins to subside. Not a bad thing given history showing that a lot of non-mining industry can be shown to have been squeezed to the brink post mining booms.
The AUD was lower across all of the currencies in the trade-weighted basket, but particularly the EUR. Today we have Australian trade data for August released as well as China's non-manufacturing PMI for September.
Majors: The US dollar was marginally weaker overnight in a fairly quiet offshore session. There was little in terms of top-tier data or major events
overnight but ongoing uncertainty about when Spain will formally request a bailout has seen equity markets generally weaker.
Spanish PM Rajoy indicated a bailout request is not imminent, but press reports suggest Spain is edging closer towards applying for the ESM and could make the request as early as this weekend.
Those rumours buoyed investors in Spain with Spanish equities up 1.1% when all the other major European indices were lower, while Spanish 10-year bond yields fell to 5.75%.
Looking to Greece, the Troika, which comprise the European Commission, the International Monetary Fund and the European Central Bank, rejected EUR2 billion of Greece's proposed spending cuts, requesting further cuts in wages and pensions.
Services PMIs are released offshore in China, Europe, UK and US, while the US also has ADP employment for September ahead of non-farm payrolls on Friday.
03 OCT AUS Trade Balance Aug
AUS HIA New Home Sales Aug
CH Non Manufactruing PMI
US ADP Employment Change Sep
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