Reserve Bank of Australia policy makers discussed keeping interest rates on hold at the May 3 meeting so they could await more information, but decided on balance that a cut then would help bring inflation to target over time. A "broad-based" cooling of inflation pressures persuaded the central bank that the economy would be supported by an interest-rate cut even as the growth outlook remained steady. RBA board members decided to cut the official cash rate by a quarter point to 1.75%, according to the minutes of its latest policy meeting. Governor Glenn Stevens's first interest-rate cut in a year came after a report last month showed that some of the ill disinflationary winds blowing in economies from Japan to Europe have reached Australia. The consumer price index fell for the first time since 2008 in the first quarter, while annual core growth eased to the weakest on record, prompting the central bank to revise its inflation outlook. Yet, the RBA noted there had been no material change in its forecast for growth and was still of the view that the economy continued to rebalance away from the mining sector, backed up by 'very accommodative' monetary policy and a lower exchange rate since 2013. Despite the RBA's reluctance to ease monetary policy, before the minutes' release, futures markets had priced in the chances of another cut, to 1.5%, for the August meeting at 80%, and the possibility of September cut at 92%.
Quarterly GDP growth showed a positive trend in the Euro area, rising above previous quarter levels even after a downward revision. Euro zone's seasonally adjusted GDP showed a 0.5% gain, topping the 0.3% advance in the final quarter of 2015, but falling short of analyst expectations, who estimated no change in the measure after revision. The yearly GDP growth was revised slightly down as well, as it displayed a 1.5% improvement, repeatedly causing analyst disappointment. While almost all of the countries in the Euro zone experienced higher growth, with the exception of Latvia and Greece, Germany led the way with an immense improvement in economic performance, as its quarterly GDP expanded by 0.7%, compared to a previous 0.3%. Other large Euro zone economies showed a strong positive trend in their quarterly GDP as well, with France advancing 0.5%, the Italian economy expanding by 0.3% and Spain staying steady at 0.8% growth. Discussion on political uncertainty has, however, fuelled doubts over the sustainability of Spain's future growth estimates. A separate report showed Germany's inflation rate slipped into negative territory in April, with the CPI gauge falling 0.1% year-on-year, compared with the preliminary estimate of the 0.1% increase.
Upcoming fundamentals: US inflation to grow in April
EUR/USD expects heavier momentum triggers
Yesterday EUR/USD regained only a tiny percentage of Friday's losses, as data-free trading session ended with no distinctive leadership of either bulls or bears. As for the first daily resistance line, we are still looking at the weekly pivot point placed at 1.1346, followed by the 20-day SMA 14 pips higher. The bearish challenge is circled around the monthly S1 along with the 55-day SMA that are guarding the ten-pip zone at 1.1288/78. If it is breached today, then the pair will try to lunge at the first weekly demand at 1.1246. However, daily technical indicators have resumed pointing to the upside today.Pending orders continue retreating, sentiment steady
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade above 1.12 by August
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between April 17 and May 17 expect, on average, to see the currency pair marginally above 1.12 by the end of August. Though 55% of participants believe the exchange rate will be generally below this round level in ninety days, with 37% alone seeing it below 1.08. Alongside, 21% of those surveyed reckon the price will trade in the range between 1.12 and 1.16 on August 31.