RBA Keeps Forex Trading Plan Unchanged, USD Firm on July 4th

During the July policy meeting on Tuesday, July 4, the Reserve Bank of Australia (RBA) caught the market off guard by maintaining its forex trading plan without any changes. In the meantime, the US Dollar maintained its stability on Tuesday morning, recovering from its earlier weakness triggered by the underwhelming ISM Manufacturing PMI survey. As US stock and bond markets observe the Independence Day holiday, trading should have a limit in activity.

US Manufacturing Sector Contracts Further, Impacting US Dollar’s Performance

The RBA’s announcement revealed that the Official Cash Rate (OCR) would remain unchanged at 4.10%. Economists were divided on the decision, with 16 of 31 forecasting a 25 basis points rate hike to 4.35%. The RBA stated that “some further tightening of monetary policy may be required” but emphasized that any tightening would depend on economic and inflationary developments. Initially, the Australian Dollar dipped below 0.6650 before staging a recovery, trading flat near 0.6670.

The US manufacturing sector witnessed a further contraction in June, as indicated by the ISM Manufacturing PMI survey released on Monday. The headline index dropped to 46, below the May reading of 46.9 and below the market expectation of 47.2. Additional details revealed a decline in the Employment Index to 48.1 and the Prices Paid Index to 41.8. The US Dollar Index retraced its gains following this data, consolidating around 103.00.

Major Forex Pairs’ Trading Plan for Today: Crude Oil Prices Rise Initially But Retreat On Concerns Over Demand Outlook

EUR/USD showed no clear direction on Monday and continued to fluctuate around 1.0900 early Tuesday.

GBP/USD remains in a sideways pattern near 1.2700 for the second consecutive day.

Crude oil prices edged higher on Monday after Saudi Arabia announced the extension of its voluntary oil output cut by one million barrels per day, now covering August. However, prices retreated from around $72 per barrel of West Texas Intermediate due to concerns over the demand outlook following the disappointing US ISM PMI report.

USD/CAD remains steady above 1.3200, awaiting the release of the Bank of Canada’s Business Outlook Survey for the second quarter.

USD/JPY moved within a narrow range below 145.00 on Tuesday. Japanese Finance Minister Shunichi Suzuki emphasized close communication with the US on FX matters. At the same time, Japan’s top currency diplomat Masato Kanda stated the exchange of views and communication with authorities in various countries, including the United States, on currencies and financial markets, among other issues.