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AUD Stages Minor Bounce Pre-RBA

FOREX
  • The late rally last week in the JPY has slowed, putting USD/JPY back above the Y135.50 level. Last week's highs at 137.00 remain the key upside target, but a more solid recovery in equity markets will likely be needed to put the pair on more stable footing.
  • The greenback traded similarly softer, although recent ranges are being largely respected thus far. The EUR fared better, seeing some support following comments from ECB's Vasle, who sees more hikes as likely in Q4 after the September decision.
  • AUD was a notable outperformer ahead of this week's RBA decision, at which the bank are seen raising rates by 50bps to 1.35%. The Australian STIR space currently prices in ~43bp of tightening come the end of the Bank’s July meeting, which equates to just under a 75% chance of a 50bp hike. AUD/USD has bounced off last week's cycle lows, but remains well south of last week's best levels.
  • Elsewhere, price action has generally been thin on the ground, with US markets broadly closed due to the July 4th holidays.
  • Outside of the RBA rate decision on Tuesday, a number of BoE speakers are due, with Tenreyro speaking following the publication of the bank's financial stability report.
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