Australia dollar is mildly lower in Asia today after data showed the country unexpectedly recorded the first trade deficit in almost a year. Also, RBA left rates unchanged and published a rather balanced statement. Trade balance swung from revised AUD 1.43b surplus in February to AUD 0.21b in January and ended a 10 month run of surplus, which was the longest streak since 1972-73. Exports posted a second straight month of contraction as intense flooding across Queensland hampered coal exports. Meanwhile, the Japan's disaster would probably hamper Australian exports in the coming months but would at least be partially offset by surge in commodity prices.
As expected, the RBA left the cash rate unchanged at 4.75% for a 4th meeting as policymakers view the current monetary stance is 'mildly restrictive' and 'appropriate'. The accompanying statement is almost the same as the previous one, signaling little has changed since the March meeting. The RBA stated that the floods hit Queensland over the summer 'have reduced output and the resumption of coal production in flooded mines is taking longer than initially expected'. Concerning the situation in Japan, the central bank believed it will have 'a noticeable effect on Japanese production in the near term, although the impact on the broader Asian region is expected to be limited'.
Elsewhere, markets are steadily in range with dollar recovering mildly against other major currencies. Euro continues to struggle to break away from 1.42 level as markets are cautiously ahead of Thursday's ECB rate decision. The hike is fully priced in and the main question is on how fast would the tightening cycle be going ahead. The strong inflation data, which had CPI jumped to 2.6% yoy in March, the highest level since 2008 and the consecutive fourth months that inflation stayed above ECB's 2% target, prompted speculations that Thursday's hike is merely the start of a cycle. But markets will need more affirmation from Trichet before pushing Euro further on such rate expectations. Dollar was also stabilized a bit by Bernanke's comments overnight. The Fed chairman said that Fed will need to "monitor inflation and inflation expectations extremely closely".
FOMC minutes will be a key focus today and is expected to reversal deeper divergence in opinions among Fed members. UK PMI services is expected to be steady at 52.9 in March. Eurozone PMI services is expected to be finalized at 56.9 in March. Eurozone retail sales are expected to rise 0.1% mom, 0.6% yoy in February. US ISM non-manufacturing is expected to rise slightly to 60 in March.
Intraday bias in dollar index remains neutral for the moment and some consolidations could be seen. Even in case of another rise, we'd expect upside to be limited by 76.88 resistance and bring fall resumption. On the downside, below 75.66 will turn bias back to the downside for 75.25. Break will confirm down trend resumption for 74.19 support first and then 61.8% projection of 88.70 to 75.63 from 81.13 at 73.23.
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