Unlike last week this week is awash with economic data from Australia, the US and Europe. The first Tuesday of the month, as always, saw the Reserve Bank of Australia’s (RBA) rate decision at 2.30pm Sydney time. The RBA was not expected to move rates and has no other major monetary policy in place that would need adjusting. What the market was deciphering was the language used to describe the economy and possibly leave any clues that speculators can speculate will move rates in the future. The three big factors being discussed at the moment are mining, housing and the value of the Australian dollar.
We did see some movement on the back of the RBA’s rate decision, however nothing too drastic. Up, down then more or less where it started. RBA Governor, Glenn Stevens, made mention of mining investment set to decline, potential for capital investment in other parts of the economy and also made mention of the higher Australian dollar despite weaker commodity prices.
The biggest news this week will more than likely be the European Central Bank’s (ECB) policy meeting which is due at 9.45pm Thursday, AEST. The President of the ECB, Mario Draghi, has all but told the market the ECB will be introducing another bout of stimulus for the market.
One key change the ECB is looking to implement is negative interest rates on ECB deposit facilities. This basically means that if investing in ECB securities, instead of receiving an interest premium, you actually have to pay to hold your funds in these accounts. Theoretically this should force banks that invest in these facilities to look for other areas of investing the capital, namely lending to businesses or other borrowers.
One intention is also to add stimulus to the market and increase EU inflation. Last night inflation data was released from the Euro-zone and came in below expectations at 0.7%, which all but cemented this policy. But as with all things irrational in the market the Euro did actually close higher against most pairs last night.