AUDUSD At 5 Week Highs After RBA Keeps Rates Unchanged

RBA keeps rates steady; European reports mainly disappoint; UK manufacturing production rose but industrial production dropped. Focus is on US elections.

AUDUSD rose to a five week high of 1.0444 after the RBA kept rates steady at 3.25% while most analysts expected a cut to 3.0%. The RBA noted slightly higher inflation but it expects the price level to remain within the 2-3% target rate in the next one or two years. The pair is consolidating around 1.0430.

EURUSD initially fell to 1.2763 but later recovered to 1.2813. Spanish and Italian services PMI surprised to the upside but remain deep in contraction territory. The slight improvement in those indices was negated by Eurozone services PMI that was revised lower in October to 46.0 from initial estimate 46.2. Eurozone PPI remained steady at 2.7% y/y and German factory orders disappointed as they dropped 3.3% from previous -0.8%. EURUSD trades right below the 1.28 figure.

UK manufacturing production rose 0.1% in September following a 1.2% decline seen in August but industrial production fell sharply 1.7% from -0.5%. MNI reports that the decline was attributed to a record breaking 20.9% fall in oil and gas extraction. GBPUSD trades not far off session lows around 1.5970.

The US data calendar is limited to Canadian Ivey PMI due at 10:00 am that is expected to slow to 58.3 in October from previous 60.4. The US congressional and presidential elections take place today and preliminary results should be available late night or early Wednesday morning. The polls are tight but president Obama has a slight advantage.

Patrik Urban