RBA’s Rates on Hold

On Monday, we could see the GBP/USD losing momentum due to the release of the most important Services PMI (Purchasing Managers Index) for the United Kingdom’s economy. The new data has disappointed, coming under the initially forecasted 56.0 at only 53.3. The sentiment is reinforced also by the fact that August’s figure is higher than Septembers, at 55.6. The Institute of Supply Management (IMS) in the US has further released on Monday the non-manufacturing activity index for September, which registered a fall to 56.9 in September (versus an estimated 57.5) from August’s 59.00. Looking across the last decade, we can see that the hike in the service industry steamed down from the best reading in the last 10 years. The most apprehensible reason seems to be the fact that weak wages are pushing down on the demand, but across the global financial environment there are more and more visible signs of a slowdown in the economy.

If we have looked yesterday at the AUD/USD pair, we would have seen a 0.49% higher trend peaking at a two-weeks high of 0.7120. At the base of this 40 pips hike is the latest RBA (Reserve Bank of Australia) decision over the rates of monetary policy. Prior to the press release the trend was posting around 0.7080. According to the bank’s officials, the Australian economy has good prospects for a future growth, taking with it the AUD level. Due to the fact that the growth of the AUD is adjusting the decline in commodity prices itself, the decision put a possible rate alteration on hold for the period being. Future assessments over the country’s monetary policy outlook still remain data-dependent, as the bank further added. Massively ignored by the markets is the trade deficit posted by the Australian economy, which is AUD 3.095 billion for August, growing 11% from July and missing the forecasted AUD 2.40 billion with roughly 1/3.

Regarding crude oil prices, we can see a sharp rise yesterday. The WTI (West Texas Intermediate) barrel went up in New York, peaking at $48.60, a level last reached in September, 1^st. After the spike, the trend pulled back just under the $48.00 threshold, but it managed to stay a roughly 4% of the day over this value. Energy shares also went up, gaining momentum alongside the crude. The boost was due to new reports from US’s EIA (Energy information Administration), which stood for a growth in demand, but also from the words of the General Secretary of Opec (Organization of Petroleum Exporting Countries) which declared that the rise in demand and the fall in production of non-Opec countries is going to restore the balance. A contribution has also Russia which stated that the government is willing to impose a cut of production.