Market Drivers July 21, 2015

RBA jawbones Aussie but remains neutral
Markets very quiet otherwise with dollar under mild pressure
Nikkei 0.93% Europe -0.23%
Oil $50/bbl
Gold $1105/oz.

hope but
Europe and Asia:
AUD RBA Minutes – neutral
GBP PSNB 3.2% vs. 3.3%

North America:
No Data

With very little economic data on the docket and the immediate crisis with Greece averted for now the currency markets have gone into summer stall with volatility compressing markedly this week.

The only report of note was the release of the RBA minutes which offered little new information to the market. The RBA as usual noted that a further fall in AUD was likely and necessary to provide assistance to the market but has chosen to remain neutral for the time being.

One key reason for RBA’s reticence to cut rates sooner is the fact that Australian house owners are now leveraged at higher rates than even their US counterparts were prior to the 2008 crash. The central bank is therefore walking a fine line between trying to guide the Aussie lower while avoiding further rise in housing values via easy credit.

Still many analysts are convinced that with commodity prices having plummeted by more that 60% off their peaks Australia will not be able to avoid a recession by year end. If the country’s terms of trade continue to deteriorate the growing Trade deficits will become a massive concern for the market and may indeed become more important economic release than even the labor data numbers as we move into the second half of the year. The pressure on Aussie therefore remains acute and the pair has failed to make much of a bounce remaining under the 7400 figure all night long.

Elsewhere the UK Public Sector Net Borrowing came in line at 8.6B GBP and had no impact on cable trade whatsoever. The pair along with euro was mildly higher in mid morning London trade on some small anti-dollar flows as US yields compressed a bit. But in general the price action in the currency remains comatose this week with traders content to simply tread water for the time being.

The US session has no event risk as well and trading may be slow for the second day in a row. As the week progresses the eco calendar picks up momentum with US housing data and EZ flash PMIs on the docket but for now with news absent the pairs could remain in tight ranges for the rest of the day.