The RBA minutes were released during the Asian session today. At the meeting, a rate cut was decided and the minutes showed that the monetary policy board agreed “more likely than not” that further policy easing would be appropriate. However interestingly enough, the board indicated that lower interest rates might not be the only option on the table. The minutes also stressed the importance of the Australian labour market as “particularly important” in deciding further easing. It should be noted that the bank recognizes that the lower rates could push AUD value down and reduce household debt repayments. The board also noted that the lower rates may hurt savers, yet at the same time are expected to stimulate the economy. Given the dovish outlook of RBA and should there be further tension in the US-Sino relationships we could see the Aussie weakening further.

GBP drops as Johnson leads the race

Cable dropped to new lows for the past six months as Boris Johnson seems to be leading the race for the replacement of Theresa May. Markets seem to fear that Johnson could be paving the way for a no deal Brexit, despite him refusing it. Analysts tend to expect that Johnson will be winning the leadership race, implying also that such a scenario could lead to a confrontation with the EU. In addition, the much-discussed scenario of a “dictator’s” hard Brexit seems to be weakening the pound. The next (second) round of voting for the Tory leadership contest, is set for today and any candidate with 32 or less votes, is to be eliminated. We could see volatility rising for the pound and should headlines continue to be negative we could see the pound weakening further.

Other economic highlights, today and early tomorrow

Today during the European session, we get Eurozone’s trade balance for April and Germany’s ZEW economic sentiment for June. In the American session, we get Canada’s manufacturing sales for April and just before the Asian session starts, we get the API weekly crude oil inventories figure. During tomorrow’s Asian session, we get Japan’s trading data for May.

AUD/USD H4

GBP/USD H4

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