Good morning,

We have a very busy day ahead across the board with central bank commentary, inflation reports and monetary policy statements.

Overnight we had Australia’s inflation report, home loans and a speech from the RBA’s Debelle which left an overriding hunch that the Australian economy will face another (third) interest rate cut. The record low borrowing rate of 1% was the result of back to back rate cuts, the first since 2012. Without diving too much into the technical data, the RBA will need to carefully consider whether another rate cut really makes sense. Australian consumers have done what any other nation would do in the face of “cheap” money – borrow to the hills and back, making them one of the most indebted globally.

EURUSD has continued its recovery from 1.1160 finding a one cent bounce as we head into the ECB minutes. June’s meeting will likely cover the normal ring of fire, including discussion points around a rate cut and the reintroduction of QE. Given Mario Draghi’s strong hint at this next round of easing, the minutes will be very important for timings and volumes, with current expectations that we will see money flowing in September.

USD sentiment is still pegged to the FOMC members and their appetite for rate cuts in the US. This topic has been widely covered now, but the markets seem unable to commit to forecasting when it will kick off. Powell’s speech covered the same script as before, Trade War and tariffs equal dollar pressure, but hopes lie in the labour market.

Mark Carney is speaking at 10:00 am. The pound is still under heavy fire following his ‘doom and gloom’ update last Tuesday in which he singlehandedly doubled the chances of a rate cut before the year-end. If history repeats itself and the focus is on economic fallout from the Trade War, expect the pound to quickly retreat back into its box. GBPEUR remains 5.7% down from April Q2 and GBPUSD remains 5.6% down in the same period.

The Canadian dollar remains the standout performer so far with 4% gains against the dollar, 3.7% against the euro and 8.3% against the pound.

Have a great day.

Author: Alistair Huston, Senior Relationship Manager