Morning Update – 02/08/16 – by Arjun Lakhanpal

Morning all.. Wall St had yet another quiet session closing just marginally lower as many were waiting for the RBA and BoJ decisions on rates and fiscal stimulus respectively. The RBA didn’t disappoint but AUD failed to consolidate quick losses as the RBA gave no guidance on further cuts. This took AUD back where it came from. They noted China growth moderating again and removed text on financial market volatility and Brexit warnings. On the domestic front they see employment data as mixed but didn’t comment much on inflation as we expected, just that recent data confirmed low inflation environment. Key change was acknowledging macro-prudential policy traction and risk around housing has been reducing.  RBA likely hope this is the last cut and traders starting to think it may be and hence the rally in AUD. The Nikkei closed down 1.5% as traders fear Abe may come up short when he announces the fiscal package and we are not sure when the announcement will take place USDJPY locked just above 102.00 all night. Elsewhere, data released by the Australian Bureau of Statistics showed Australia’s seasonally adjusted trade deficit for June came in at 3.19 billion Australian dollars ($2.4 billion), compared with the A$2 billion deficit estimated by a Reuters poll. Australia’s seasonally adjusted exports slipped 1 percent on-month, while imports climbed 2 percent for the same period. GBP was quiet overnight but the BoE meeting drawing closer and EURGBP is higher again this morning. In the UK there are concerns that the BoE may cut rates this week and possibly add to QE…GBP remains capped. The final manufacturing PMI for July released yesterday showed a further deterioration from the flash release. Even more importantly, given the flash release captured 70% of the data the size of the further deterioration suggests an acceleration. Today we receive the first read on the property sector with construction PMI at 9.30am LDN. Oil is starting to ring some alarm bells again as WTI trades below $40.00 and failed to rally overnight again.. Not much data this morning but all eyes on Abe announcement which we believe will be after 08;30 bst.. Good luck..