Early into Thursday’s Asia Pacific trading hours markets were hit by the publication of Australian employment data which propelled the Australian Dollar and yet local front-end government bond yields aimed lower, indicating that markets were not convinced it would meaningfully cool RBA rate cut bets. It is unlikely that the marginally-impressive data will substantially put a dent into dovish monetary policy expectations. The recent publication of the meeting minutes suggests lower rates are ahead.
GBPUSD traders may find themselves hot under the collar if the Bank of England’s (BoE) assessment of liabilities and credit conditions amplifies additional uncertainty about the UK’s financial stability. If the survey finds debt risks are tilted to the downside, it could dampen sentiment and make traders shift from chasing returns to seeking liquidity. In this regard, the US Dollar reigns supreme and could experience capital inflow.