AUD Fell Sharply After RBA Rate Cut

AUD fell sharply against all of its major counterparts after the Reserve Bank of Australia decided to lower the cash rate by 25 basis points to 4.25%.

RBA cut interest rates for a second straight month.

The Reserve Bank said “Growth in the global economy has moderated this year after a strong performance in 2010…The sovereign credit and banking problems in Europe, to which European governments are still seeking to craft a full response, are likely to weigh on the economic activity there over the period ahead.

Financial markets have experienced considerable turbulence, and financing conditions have become much more difficult, especially in Europe.” in its monthly monetary policy statement.

Today we see that the Asian stock markets opened lower after S&P ratings agency said it might downgrade 15 eurozone countries if European leaders fail to produce a solid plan to solve the region’s sovereign debt crisis at the Friday’s summit. NIKKEI started the day at 8,644.97, the previous close was 8,695.98. HANG SENG opened at 19,009.65, previous close was 19,179.69.

S&P ratings agency said that ratings could be cut by one level for Finland, Germany, Austria, Luxembourg, Netherlands and Belgium, and by up to two notches for France, Italy, Slovakia, Estonia, Ireland, Portugal, Slovenia, Malta and Spain. It is also possible that downgrades of Germany and France would affect the rating of the bailout fund (EFSF).

Economy professor at the University of Maryland, Phillip Swagel said “The S&P move is yet another signal that euro area countries must take decisive action to deal with the crisis or else the problems will spread from Greece and others with the most acute fiscal problems to the rest of the eurozone”.

EUR/USD is trading at 1.3370 by the time of typing and for today resistances are located at 1.3465 and 1.3530. Support levels are 1.3353 and 1.3300.

GBP/USD is at 1.5626. Resistance levels are located at 1.5713 and 1.5780. Supports are located at 1.5581 and 1.5516.

USD/CHF is trading at 0.9230 by the time of typing and for today resistances are located at 0.9265 and 0.9299. Support levels are 0.9168 and 0.9133.

AUD/USD is trading at 1.0183. Resistances are located at 1.0257 and 1.0314. Support levels are 1.0155 and 1.0074.

There are some important data releases today. Halifax HPI data will be released at 08:00 GMT. Swiss Consumer Price Index report will be released at 08:15 GMT.

German Factory Orders figures will be released at 11:00 GMT. Statistics Canada will release Building Permits data at 13:30 GMT. Bank of Canada Rate Statement is at 14:00 GMT.

In-house Analyst


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