Aussie attempts to rise after RBA left rates unchanged at 2.50% as widely expected but it quickly lost momentum and settles back into prior tight range. The most important part of the accompanying statement is that RBA maintained the view that the most prudent course is likely to be a period of stability in interest rates. There are some other points to note regarding the statement. Firstly, RBA said that there were "some improvement in indicators for the labour market" even though it takes time for unemployment rate to "decline consistently". Secondly, it noted that "commodity prices in historical terms remain high, though some of those important to Australia have softened further of late." Also, thirdly, the central bank reiterated that the "exchange rate remains high by historical standards."
Also released in Australia, the government reported that trade surplus narrowed to AUD 0.73b in April from an upwardly revised AUD1.26b a month ago. This was much weaker than market expectations of AUD 1.1B. The disappointment, after the strong readings in the first three months of the year, was mainly driven by the -2% drop in exports while imports were flat. Yet, the soft data should change the rather strong outlook of the country's international trade. It is expected exports would pick up again in coming months.
Elsewhere, signs of intensification of Russia-Ukraine crisis have been worrisome. It's reported that pro-Russian rebels had shot down helicopter in fighting for control of Slovyansk and Ukraine has moved forces to Odessa. Russia warned that escalating tensions "threatens peace in Europe", raising concerns that Russia might soon intervene. Headlines related to the crisis have been haunting European investors, in addition to macroeconomic data.
In the Eurozone, ahead of the ECB meeting due Thursday, executive board member Yves Mersch noted that he saw neither inflation nor deflation risks in the medium-term. He also noted that while an extended long period of low inflation is a risk, "this is different from deflation". Last month, Mersch hinted that the ECB would in the very near future announce to support the ABS market.
Looking ahead, service data will be a major focus in European session. UK services PMI is expected to rise slightly to 57.9 in April. Eurozone will release services PMI final as well as retail sales. Canada will release trade balance and Ivey PMI. US will also release trade balance.