Dollar Recovered After Selloff, RBA On Hold

The dollar weakened overnight as weaker than expected economic data cooled speculation that the Fed is going to scale back stimulus soon. The USD/JPY breached the 99 handle and the yen strengthened broadly too. Nonetheless, markets reversed some of the overnight moves in today’s Asian session, with the USD/JPY back and trading above the 100 level at the time of writing. In other markets, Asian equities are mixed even though DOW surged 138 pts. overnight. The US 10 year yield dropped sharply, but was supported above the 2% level, recovering back to close at 2.134%. Markets are generally rather mixed for the moment, and are anticipating the key economic U.S. data due later this week for focus.

The RBA has just announced it will leave the cash rate unchanged at a 50-year low of 2.75%. Policymakers noted that economic conditions during the inter-meeting period showed little change from the previous month, and reiterated that the easing in monetary policy has "supported interest-sensitive areas of spending and has been reflected in portfolio shifts by savers and higher asset values" and "further effects can be expected over time". The RBA also noted that exchange rate "remains high considering the decline in export prices that has taken place over the past year and a half." Also released earlier today, Australia's current account deficit narrowed to AUD 8.5b in 1Q13 from AUD 14.8b in the prior quarter.

On the data front, U.K. BRC sales monitor rose 1.8% in May. Japan monetary base rose 31.6% yoy in May and labor cash earnings rose 0.3% yoy in April. The U.K. PMI construction is on focus in the European session, and is expected to improve slightly to 49.6 in May. The eurozone PPI is expected to moderate to 0.3% yoy in April. The U.S. and Canada are slated release trade balance reports.