Australia: The minutes from the August Federal Open Market Committee meeting confirmed a somewhat divided group, with three against the announcement to maintain low US interest rates until mid-2013. That said, a “few” members were on the other side of the divide, and felt an even “more substantial move” was justified.

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Policy tools canvassed included more QE (Quantitative Easing), selling short dated securities to purchase longer dated securities, reducing the interest rate paid on excess reserve balances and finally, reiterating forward guidance (which was the outcome of the August meeting). The decision to lengthen the September policy meeting has been universally applauded and has seemingly instilled some confidence, but with that said, what is intriguing is the division in the ranks and debate on which way the Fed will go.

In the currency markets, this translated into the commodity currencies (AUD and NZD) outperforming the EUR, GBP and USD. Gold pushed 2.6% higher and base metals strengthened while soft commodities were mixed, with corn and soybeans stronger, and wheat, sugar and canola, lower.

In Australia today, the RBA Credit Private Sector Credit release for July is expected to show a rise of 0.2% after the fall of 0.1% recorded for June. Business credit will be closely monitored in this release. The RP-Rismark House Prices for July is also due with another fall in monthly house prices forecast. We see the AUD consolidating here for the moment as it potentially grinds higher over coming weeks.

Majors: The EUR and USD were slightly weaker as European and US equities endured quite choppy sessions. Negative data in the Euro Zone and the US didn’t help the cause, but as written above, the market generally saw the FOMC minutes as a good outcome, with further stimulus for the US economy a healthy chance, if required.

Tonight sees the release of South Korean industrial production with the market expecting a rise of 0.5% (6.2%yoy), while in the US, ADP Employment, a lead for Non- Farm Payrolls on Friday is due, and the market is looking for a rise of 100k. The Chicago PMI and Factory Orders are out and the market will pay attention to the Atlanta Fed’s Lockhart (Alternate Member of FOMC), who is speaking in Lafayette, Louisiana.

Economic Calendar
EU Eurozone CPI AUG
EU Eurozone Unemployment Report Jul
US Factory Orders Jul