The US dollar continued to find itself under pressure during Wednesday’s Asian trading in the absence of significant US data releases so far this week. The euro was particularly strong versus the greenback, climbing all the way up to 1.0968 as it rebounded from its 2-month low just above 1.08 on Tuesday’s Asian session.
Greece managed to repay its 2 billion euros debt that was in arrears against the International Monetary Fund and there was a 2-notch upgrade of the country by rating agency Standard & Poor’s. All eyes would turn to the Greek parliament today, as it is set to approve the second package of measures required for the start of negotiations for a 3rd bailout package. The vote could give some additional clues with respect to the backing of Greek Prime Minister Alexis Tsipras within his own party and how that bodes for the country’s future political landscape.
In Australia, inflation for the second quarter came in close to expectations, with the key weighted mean and trimmed mean measures that the Reserve Bank watches, posting a 2.4% and 2.2% annual increase respectively. A speech by the central bank Governor Glenn Stevens contained a relatively downbeat assessment of the economy as well as repeating the call for more depreciation of the Australian dollar. However it was not clear that the RBA would cut more, as the Governor cited risks to further cuts such as encouraging excessive leverage. The aussie managed to climb above the 74 US cents level at 0.7425 and maintained those levels after hitting a 6-year low of 0.7327 on Tuesday.
Overall the weakness in the US dollar was seen as an opportunity to establish fresh longs rather than signaling something more ominous for the currency. The market was characterized by thin volumes and lack of important economic data, which can sometimes make trading more volatile as witnessed by the previous day’s sharp rise in euro / dollar. Concerning the dollar, attention was also shifting to next week’s Federal Reserve meeting – which could prepare the ground for a September rate hike.
Coming up, the minutes of the Bank of England meeting as well as the voting record, will be closely scrutinized as sterling is doing well on the back of expectations that rates could be heading higher in the UK towards the end of the year. Existing home sales for June out of the United States should point to a buoyant housing market. Finally, after the US close, the Reserve Bank of New Zealand is expected to cut its key interest rate by 25 basis points to 3% and give guidance for further rate cuts to come.
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