AUDUSD gained momentum after Reserve Bank of Australia governor Stevens have an upbeat speech and signalled there will not be any easing of monetary policy for now while there is turmoil in the markets and that the bank was watchful of inflationary pressures. So markets read into this that there is no risk of any deep interest rate cuts as the banks had warned about last month. AUDUSD climbed to a session high of 1.0501 from a low of 1.0416.
EURUSD opened at 1.4379 in Asia after a volatile US session where the pair fell sharply from 1.4474 to 1.4328 following the large dip in European stock markets, particularly the German DAX after rumours that Germany could introduce a short-selling ban on equities, which was later denied. In the Asian session euro tracked higher after news that the Spanish government said it had reached an agreement with the main opposition People’s Party over plans to limit public debt by passing legislation to include it in the constitution. This helped ease markets concerns which are growing over debt contagion in the euro zone.The focus is now on Fed Chairman Bernanke’s speech later in Jackson Hole. Investors are almost sure he may not unveil a third round of quantitative easing.
GBPUSD opened in Asia at 1.6284 and gradually drifted higher to 1.6316 given a slight boost following RBA Governor Stevens comments ruling out a rate cut at the next meeting. With lack of domestic economic data, cable took direction from elsewhere and the RBA news gave risk currencies like sterling a boost and most major risk pairs gained on the back of the jump in the AUDUSD.
USDJPY opened Asia at 77.46 after hitting as high as 77.68 during the US session but was due for correction. Meanwhile, markets were rattled after Japanese Prime Minister Naoto Kan announced he will be resigning after only 14 months on the job, undone by a backlash over his leadership after the March 11 earthquake. Also Japanese data on CPI rose higher than forecast. However the pair will likely recover losses and firm further ahead of Bernanke’s speech later today since the view is that the Federal Reserve will not signal additional stimulus through quantitative easing. For now there are still alot of long positions from the beginning of the week when the consensus was for more QE3 but that has changed and so we may see further unwinding of those positions ahead of Bernanke. USDJPY fell to a session low of 77.25.
Gold steadied off in Asia after rebounding in the New York session, snapping the biggest decline since 2008, as slumping global equities revived the appeal of the precious metal as a safe haven asset. Global stock markets fell, sending the MSCI World Index of equities down as much as 1.4 percent in North American trading. During the Asian session gold prices peaked at $1,782 after dipping to $1,757.