FX Roundup: RBA decision sends AUD higher, pound flat ahead of 'Super Thursday'
Early trading on Tuesday saw the pound flat and euro up marginally, while the Australian dollar clawed back some ground after the Reserve Bank of Australia (RBA) decided to keep its interest unchanged at 2%.
The central bank’s governor Glenn Stevens said, "While the rate of [economic] growth has been somewhat below longer-term averages, it has been associated with somewhat stronger growth of employment and a steady rate of unemployment over the past year.
"Overall, the economy is likely to be operating with a degree of spare capacity for some time yet."
Following the decision, the AUD continued its recovery run from the previous session’s lows extending the rally well into the European morning, fetching US$0.739, up 1.43% at 1000 BST.
Kit Juckes, head of forex at Societe Generale, said that for now the RBA is no longer talking the currency lower.
“Again, with the US Federal Reserve/RBA policy set to diverge further in the months ahead, and with the AUD still vulnerable to adverse shocks from the Chinese economy or from global commodity markets, I wouldn't rush out to declare the four-year downtrend in AUD/USD over, but it's not the most attractive short looking forward,” he added.
Forex positions as hedges against more bad news from China are better achieved through NZD/USD shorts for now, Juckes opined.
Meanwhile, the pound sterling was broadly flat, fetching $1.5592 as traders await the Bank of England’s 'Super Thursday' of inflation projections, as well as the central bank's interest rates decision, and the minutes being published on the same day.
Finally, the euro was seen recovering ground, having weathered declines for much of the previous session. As the Greek equities sell-off continued, a euro was fetching $1.0961 up a mere 0.10% but nonetheless in positive territory following a decent Eurozone manufacturing data around the common currency area overnight, excepting Greece.