Market Drivers April 19, 2016

RBA Minutes show no concern on Aussie
ZEW — better
Nikkei 3.68% Dax 1.84%
Oil $41/bbl
Gold $1243/oz.

Europe and Asia:
RBA Minutes – no concern on Aussie
EUR EZ Current Account 19B vs.21.3B
EUR ZEW 11.2 vs. 8.0

North America:
USD Housing Starts 8:30
USD Building Permits 8:30

The dollar was weaker against all of its trading partners with the exception of the yen in Asian and early European trading today as risk on flows helped fuel the move. With Nikkei rebounding by more than 3% and Dax up nearly 2% investors were in a buoyant mood sending yen crosses higher.

On the eco front the calendar was relatively light with RBA minutes dominating Asian session trade and ZEW survey the only release during European hours. RBA minute revealed little new info with the central bank essentially reaffirming that it saw reasonable prospects for moderate growth.

In their discussions the Australian central bankers noted that the recent appreciation of Aussie could complicate the rebalancing of the economy highlighting that the services export sector could be particularly impacted by the move. For that reason the RBA stated that monetary policy will remain highly accommodative, but in fact that simply means that the central bank will remain stationary for the time being. There were no hints that the central bank would consider cutting rates any further given the generally robust labor market conditions and the stabilization of Chinese economy.

Governor Stevens is scheduled to speak in New York tonight and he may jawbone the Aussie further noting that the currency remains strong, but we doubt that his rhetoric will be particularly dramatic given the generally laissez faire tone of the minutes. We suspect that the RBA will grudgingly accept a rise in the Aussie up to the 80 cent level, but if the pair begins to move much higher than that the central bank will become much more aggressive in its efforts to lower the exchange rate.

In Europe the ZEW sentiment survey printed a bit better than forecast at 11.2 versus 8.0 eyed as the improvement in Chinese economic data buoyed investors. The EUR/USD rose comfortably above the 1.1300 level and was trading near the 1.1340 area by mid morning London dealing. The pair remains in a general state of equilibrium capped by the 1.1450 resistance to the upside and 1.1250 support to the downside as investors await the ECB meeting later this week. With conditions in the Eurozone stabilizing sentiment towards the pair has improved markedly over the past few months and unless Mr. Draghi surprises the market with any fresh accommodative actions the pair could remain well supported at these levels for the time being.

In North America today the calendar is very quiet with only the Housing data on tap, so the familiar factors of oil and equities will likely be the drivers of trade once again. We have noted for the past few days that USD/JPY continues to shows signs of bottoming and if today price action proves supportive in equities the pair could make a run towards the psychologically key 110 level as the day proceeds.

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