Euro Drops Below 1.35, RBA Unlikely to Cut
The euro fell hard to start the week on worries about periphery politics. EUR was the laggard on the day while the pound was surprisingly strong. The focus now shifts to the RBA decision in the hours ahead. A new edition of the Premium Insights ahead of the RBA has now been added. USDCAD and AUDJPY are added back to the Premium trades after a long absence.
Spanish yields rose more than 20 basis points on Monday as an illegal donation scandal threatens Spain's ruling party. Concerns about a hung parliament following Italian elections at the end of the month also weighed.The euro grinded steadily lower from 1.3625 to 1.3500.
USD/JPY also sank to 92.00 after touching 93.00 in European trading. The reversals on Monday beg the question whether it's yet another buyable dip or the start of a deeper retracement. We believe the trends will eventually continue higher but will be mindful of the risks.
The highlight of Asia-Pacific trading comes at 10:30 pm ET when the RBA makes its latest interest rate announcement. Economists are one-sided in expecting no change but the OIS market is on guard and pricing in a 33% chance of a surprise cut.
If the RBA holds, the focus will shift to comments about the economy and the potential for rate cuts in the month's ahead.AUD/USD is near the top of its recent range at 1.0440 and a large move (more than 50 pips) in either direction is probable.
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