The Reserve Bank of Australia left its cash rate unchanged at 2.0% on Tuesday at its latest policy meeting. The decision was in line with forecasts but the Australian dollar strengthened after the announcement on lowered expectations of a cut in December.
In the accompanying statement, RBA Governor Glenn Stevens said that economic conditions “had firmed a little” in recent months. But he added that inflation is forecast to be a little lower than expected, which may give some scope for further easing of policy. This signalled the possibility of further rate cuts, unlike in the previous statement, which was more neutral in tone.
The aussie spiked down to 0.7111 right before the announcement but jumped to 0.7202 against the US dollar after the decision as expectations faded of another cut in the near term. It was last trading at 0.7204 in late Asian session.
The US dollar drifted lower for much of the Asian session as traders remain cautious ahead of Friday’s October jobs report. Positive survey results on Monday added little support to the greenback. The Markit manufacturing PMI and the ISM manufacturing index both came in above estimates in October.
The dollar was down at 120.61 yen in late Asian trading, having hit a high of 120.84 yen earlier in the session. The euro was also stuck in a tight range and edged up slightly to 1.1021 against the dollar, but was flat against the pound at 0.7142.
Sterling gave up yesterday’s gains against the dollar from the strong manufacturing PMI as the equally strong US data pushed the pound lower later in the day. It was up slightly at 1.5433 dollars in late Asian session.
Crude oil prices were flat on Tuesday and remained under pressure on record Russian production and in anticipation of a US rate hike. US oil futures were last trading at $46.13.
Gold prices bounced back on Tuesday after four straight days of losses. Renewed expectations of a December rate hike by the Fed has weighed on gold, which hit a 4-month high of $1191.47 on October 16. It was up at $1136.76 in today’s Asian trading.
Coming up later today, UK construction PMI will be the main data in a relatively quiet European calendar day. In the US session, factory orders are expected to show a decline for a second consecutive month in September.