Buck Bounces Back

The dollar was broadly stronger across the board today with pound falling on GBP/JPY selling flows while euro was hurt by very weak German Industrial Production data.

The Aussie was initially bought in the wake of modestly upbeat RBA statement, but tumbled lower into European session trade. The RBA kept rates on hold at 1.5% as expected, but noted that conditions in the global economy improved in the recent months.

The RBA noted that, "The Bank's central scenario remains for economic growth to be around 3 per cent over the next couple of years. Growth will be boosted by further increases in resource exports and by the period of declining mining investment coming to an end. Consumption growth is expected to pick up from recent outcomes, but to remain moderate. Some further pick-up in non-mining business investment is also expected."

Analysts were mixed in their responses with some pointing to a more bullish tone of the statement while other still projected that the next move from RBA will be a rate cut. Still the market appears to be in an almost universal consensus that rate will remain stationary for quite some time and that realization helped unwind any early enthusiasm sending Aussie lower towards the .7600 figure.

The dollar strength meanwhile remained impressive with EUR/USD falling all the way to 1.0656 before finally finding some bids. The pair was hurt by surprisingly weak German Industrial Production readings which showed a decline of -3.0% versus forecast of 0.2% gain. This was the biggest drop since 2009 was particularly unexpected given the recent weakness of the exchange rate. Although German officials noted that they anticipate a strong rebound within months, the news weighed on the euro today.

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