Japan’s All Industry Activity Index printed in line with expectations at -0.9% in June. Australia’s Westpac Leading Index printed at 0.1%, suggesting the Australian economy was expanding at an annualized rate of just 2.0% in June, the slowest in 8 years. The minutes from the last meeting of the Bank of England will take center stage in the forthcoming European session. Traders will look to gauge if the fall in crude has shifted the Monetary Policy Committee closer towards a rate cut.
Key Overnight Developments
• Australian economic growth slowest in 8 years, says Westpac
• Euro, Pound hold on to gains in overnight trading
Critical Levels
The Euro remained range-bound overnight having advanced deeply past the 1.47 level in US hours. DailyFX Chief Strategist Jamie Saettele expects the Euro to correct to 1.5000 before an eventual decline to 1.4431. Sterling followed the lead of its continental counterpart, trading in a 40-pip range in Asian hours. Support is seen at 1.8625 with resistance at 1.8786 and 1.9034.
Asia Session Highlights
Japan’s All Industry Activity Index printed in line with expectations at -0.9% in June. The metric is fairly volatile and rarely has a substantial affect on Yen price action. That said, the release does reinforce the negative tone of recent Japanese economic data, further supporting the likelihood of a looming recession for the world’s second-largest economy.
Australia’s Westpac Leading Index printed at 0.1%, suggesting the Australian economy was expanding at an annualized rate of just 2.0% in June, the slowest in 8 years. This is a decline from the reading at 2.4% seen in the preceding month and well below the trend level at 3.9%. The release will add urgency to the Reserve Bank of Australia’s conviction to cut interest rates in the near term. Minutes from the RBA’s August policy meeting released earlier this week saw policymakers assert that “less restrictive conditions could soon be called for…a case could be made for an early reduction in the cash rate.” DEWR Skilled Vacancies contracted -1.7% in August, with a revision of July’s reading putting the metric at -2.0%, the lowest in 17 months. The report offers an early reading on deteriorating conditions in the labor market, further compounding the likelihood of monetary easing.
Euro Session: What to Expect
The Bank of England will take center stage in the forthcoming European session. Traders will be looking to gauge the evolution of the balance of power between the hawks and doves on the Monetary Policy Committee. DailyFX Strategist Terri Belkas has noted that a rate hike is altogether out of the question as the UK economy stands at the brink of a recession. July’s rapid 22% drop in the price of crude oil may have allowed perennial dove David Blanchflower to recruit several others to his camp, helping to hasten the pace of monetary easing. The market is currently pricing in close to 75 basis points of rate cuts in the next 12 months.
To contact Ilya regarding this or other articles he has authored, please email him at [email protected].
