Australia: The AUD fell over 3 cents in the last 24 hours, with the weakening during our trading session yesterday, a result of the Bank of Japan intervening in the FX markets to weaken their local currency. Focus then moved back to Europe and the US, with serious concerns that we will fall into another global recession as these economies continue to fall behind.

[Kick off your trading day with our newsletter]

Equity markets were hit hard in both regions with the European equities down 3.4% across the board, and the US equity markets hit even harder down over 4%. The DOW closed down 4.3% and the S&P500 down 4.8%. The US equity markets have fallen over 11% since the 29th April. Today we see the release of the RBA Statement on Monetary Policy for the 2nd quarter.

Many are expecting that they will continue to focus on the economic problems overseas and the possible inflation affects for our region. We are expecting that the AUD will continue on the weaker side today as local equity markets digest the overnight developments. Initial support for the AUD is seen at USD1.0390 with the next support at USD1.0250.

Majors: Panic selling in the US equity markets overnight occurred despite some encouraging employment data prior to tonight’s important non-farm payrolls release. The US weekly jobless claims rose by 400k for a second consecutive week which was slightly below the market expectations.

This does give some hope head of tonight’s employment data, with markets expecting a modest rise of 113k for July. Despite the expectation of a positive result, it’s unlikely to change the unemployment rate which is currently sitting at a peak of 9.2%.

The European Central Bank last night kept interest rates on hold, but continued their stance on the current tightening basis. They did however decide to restart buying of troubled euro-zone bonds, but this did little to soothe the markets, especially since Italy and Spain (two countries who many believe will be next to fall to the
sovereign debt sword) were left out.

The EUR/USD moved lower as a result, with the demand for the USD high. The EUR/USD is currently trading at USD1.0408, and should we see it break through USD1.0400, then this could impact other markets such as the AUD.

Economic Calendar

AU RBA’s Statement on Monetary Policy Q2
UK Input / Output JUL
US Change in Non-farm Payrolls JUL
US Unemployment Rate JUL

More from IBT Markets:
Follow us on Facebook.
Follow us on Twitter.
Subscribe to get this delivered to your inbox daily