Aussie tumbles broadly as RBA, after some market anticipations, finally announced to cut cash rate by 25bps to new record low of 2.25%. The statement was dovish, noting that "output growth will probably remain a little below trend for somewhat longer, and the rate of unemployment peak a little higher, than earlier expected." And, "the economy is likely to be operating with a degree of spare capacity for some time yet." RBA also expected that inflation will "remain consistent with the target over the next one to two years, even with a lower exchange rate." Regarding exchange rate, RBA noted Aussie "remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices" and further depreciation is needed to support rebalancing of the economy. Also released from Australia, trade deficit narrowed to AUD -0.44b in December versus expectation of AUD -0.85b. Exports dropped -4.1% yoy while imports dropped -2.8% yoy. Building approvals dropped -3.3% mom in December versus expectation of -4.8% mom.
US equities rebounded overnight on optimism over the situation in Greece. DIJA rose 196.09 pts, or 1.14% to close at 17361.04, defended key near term support level around 17000. S&P 500 closed up 25.86 pts, or 1.30%, also defended key near term support at 1972. Asian equities followed by opening higher but lost momentum quickly. It's reported that Greek Finance Minister Yanis Varoufkis is proposing a bond swap agreement. That involves that Greek government bonds held by ECB, which are seen to be able to be restructured. Varoufakis proposed to swap these government bonds for growth linked and perpetual bonds. Talking about Greece, EB governing council member Christian Noyer said that ”Greece has the capacity to bring down the debt ratio quite quickly." That's mainly because of the grow ability of capacity for its under-utilized workforce.
Regarding Eurozone, ECB governing council member Ewald Nowotny said that there could be "negative inflation rates" in some of the months to come and the central bank "is missing its goal of price stability". Executive board member Benoit Coeure said that the EUR 60b per month asset purchase program is "open-ended" and would continue until "a sustained convergence toward our definition of price stability. That means, if the program cannot achieve the goal at the end, that is September 2016" ECB will "do more". Meanwhile, the maturity allocation of the purchase will be "broadly based on market outstandings". He noted there is "little leeway" for readjustment as EB wants to "create as little market distortion as possible".
Looking ahead, Swiss trade balance, UK construction PMI and Eurozone PPI will be released in European session. Canada RMPI and IPPI, US factory orders will be released in US session.