Market Drivers for December 3, 2013
RBA statement relatively unchanged creates a relief rally
USD/JPY clears 103.25 on importer demand
Nikkei 0.60% Europe -0.20%
Oil $94/bbl
Gold $1224/oz.

Europe and Asia:
AUD RBA keeps rates on hold, statement unchanged
AUD Retail Sales 0.5% vs. 0.4%
GBP UK Construction PMI 62.6 vs. 59.3
EUR PPI -0.5% vs. -0.2%

North America:
USD IBD Economic Optimism 10:00

The Australian dollar found its footing after early morning selloff in Asian session trade in the wake of an RBA statement that remained largely unchanged. The RBA left the benchmark rate unchanged at 2.5% and noted that the currency remained “uncomfortably high”, but otherwise kept the same language as the month prior offering no signal that the central bank will consider further easing in the near term.

One reason for RBA’s relative complacency is the steady rate of performance in Australia whose economy continues to transition from relying on heavy exports to China to a more balanced service based growth. Tonight’s Retail Sales which increased at 0.5% versus 0.4% eyed confirmed that the consumer remains relatively healthy as both the housing and equity markets have strengthened.

The Aussie initially dipped to a low of .9056 but soon found bids from corporate and leveraged accounts as bargain hunting kicked in. The pair has been battered for the past week on fears of intervention and threat of further rate cuts. However, with Australian economy relatively stable and Chinese manufacturing demand continuing to expand the RBA is likely to remain stationary for the time being which could provide some support for AUD/USD at the key 9000 level as the pair tries to stage a relief rally towards 9200.

Elsewhere in UK the eco data continued to surprise to the upside with Construction PMI rising to 62.6 from 59.3 eyed. This is the second of the three PMI readings this week and if tomorrow’s services report shows similar strength cable could make a run at the key 1.6500 level as UK economy continues to record the best performance in G-7.

Meanwhile the euro also found a bid rising to a high of 1.3577 in early European trade despite further evidence of deflationary pressures as the PPI printed at -0.5% versus -0.2% forecast. The unit continues to benefit from capital flows as end of the year investment pours into European equities. However the pair remains contained at the 1.3600 barrier and is unlikely to rise much past that level unless US data surprises to the downside and raises the possibility of delay in the QE taper.

In North America the calendar is quiet today before activity picks up markedly tomorrow and trading could be choppy. USD/JPY took out the reputed option barriers at 103.25 but quickly faded off those levels dropping to a low of 102.65 by mid-morning London dealing as it continues to eye the yearly highs at 103.65. However, given the cautious nature of today’s trade, markets may choose to wait until Friday before making an assault on those key levels.

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