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    MORNING BELL: RBA keeps rate unchanged

    The potential of an unsettling parliamentary election caused the British pound to drop from its seven-year high versus the euro and an eight-week high against the US dollar. The seven month high in the Manufacturing PMI data did not help much to sustain last week’s gains. On the other end, the euro also gave up some gains as it dropped below $1.12, just before the ECB begins its quantitative easing program this week.

    The Reserve Bank of Australia decided against all expectations to keep its cash rate on hold early on Tuesday, at 2.25%. The RBA stated that keeping the rates unchanged is the most appropriate decision for the time being, but further easing might be better in the future. Moreover, it was pointed out that a further drop in AUD is needed in order to balance growth. The Australian dollar gained more than 65 pips against the US dollar during the announcement.

    The Dollar Index, which tracks the US dollar versus its major competitors, reached an eleven year high, peaking at $95.73.  Despite the worse than expected ISM Manufacturing PMI data, the greenback has been steadily gaining ground as the economic outlook of the US seems much better than that of many other major countries.  The expectation for a FED rate increase by September of this year is strengthening the dollar even more.

     

     


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