Bell FX Currency Outlook: The Australian Dollar was little changed for the second successive night in offshore markets.
Australia: Interest in the Australian Dollar was muted overnight with price action in other currencies taking front and centre stage and overshadowing the AUD's consolidation above 1.0350. The AUD has been a solid performer over the last 24 hours, buoyed by what the market interpreted as a less dovish tone from the RBA Board Minutes yesterday.
In our view, the RBA remains anxious but the market pricing of only a 25% chance of a cut after the Minutes for March looks to be pretty fair.
Today, AUD starts the Asia pacific session close to the NY session highs and may draw some further support this morning if March RBA rate cut expectations recede further. It's doubtful that this morning's domestic economic news will have major influence but need not prevent the erosion of residual rate cut hopes.
Importer supply and options related flow looks like the best hope for a cap on AUD today. The NZ Dollar was stronger alongside a positive auction of milk powder, reversing the losses suffered in yesterday's Asian session on news, later modified, that China had destroyed NZ milk cargoes.
AUD/NZD fell but the market expects a rebound above 1.2400 as monetary policy expectations in the two economies diverge in favour of appreciation.
Today in Asia markets will focus on Australian fourth quarter wages data before consolidating ahead of the FOMC minutes later tonight.
Majors: The JPY was stronger following Japanese Finance Minister Aso's comments regarding the Japanese government suspending its planned purchase of foreign assets.
The market reaction was decisive given the announcement came closely in the wake of the G20's communiqué on competitive devaluation. USD/JPY ground lower to 93.50.
The GBP fell towards 1.5400 as rumours circulated that a ratings agency would downgrade the UK's sovereign debt rating ahead of the Bank of England Minutes tonight.
Finally, European equity market strength, following the release of better-than-expected ZEW data for February, underpinned a positive tone to EUR/USD and EUR/CHF.
Looking ahead, of increasing influence on the EUR over the balance of the week is likely to be growing concern about the weekend/Monday Italian elections which carry some significant downside risk for the EUR.
20 FEB AU Q4 Wage Price Index %qtr
US Jan Housing starts %mth
US Jan FED FOMC meeting minutes
UK BOE meeting minutes
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