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AUD slips ahead of RBA

Tesla, man and machine

The Australian dollar came under pressure in overnight trading ahead of today’s Reserve Bank of Australia interest rate decision. The slip defied a general risk-on tone, as shares and industrial commodities bounced back from recent weakness. Silver markets remain in the spotlight as the Reddit effect moves on from a tumbling GamesStop share price.

The RBA is almost universally expected to keep rates on hold today. Forex traders are looking for an even handed announcement. A majority expect the RBA to lift its economic projections for 2021, potentially offset by dovish commentary and possibly an extension of quantitative easing beyond its April expiry.

More hawkish analysts are looking for a discussion of tapering, but the recent fragility of market sentiment makes this less likely. The RBA’s view of the latest rise in Australia’s terms of trade could drive short term movement in the dollar.

Just five top 500 US stocks reported overnight, but there are 110 reports this week – the busiest week of the calendar. Otis Worldwide, NXP Semiconductors and Thermo Fisher Scientific all came in ahead of forecast, adding to the general strength. Tonight brings two key reports – Amazon and Alphabet – and traders will look for any further 'sell the fact' reactions to major teach earnings reports.

The Australian corporate reporting season also kicks off today – please see our separate report.

Stock futures point to opening gains of around 0.5% to 1% in Japan, Australia and mainland China, and modest falls in Hong Kong and Singapore. Lower local currencies may see additional support for regional assets in trading today.

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