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Asian Session – Aussie rallies after Reserve Bank chooses to stay on hold

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The Australian dollar was the session’s best performer, after the Reserve Bank of Australia decided to keep rates on hold at 2.25% during its meeting today. The aussie jumped more than a full cent against the US dollar from under 76 cents to briefly top 77 cents after the central bank announced that it would keep its benchmark rate unchanged. The market had largely priced in a quarter-point rate cut, although economists were roughly evenly split on the possibility.

Despite keeping policy constant, the policy statement was relatively dovish and left the door open for more cuts in future meetings. However, the Australian dollar would need to drop more given the drop in the price of commodity exports, according to the central bank. The aussie had also received a boost earlier in the session after Australian retail sales for February beat expectations.

The US dollar managed to hold on to some significant gains – both against the yen and the euro – that were registered during the previous day’s US session, as bullish Services sentiment surveys helped the currency to recover after recent weak data such as the undreperforming March payrolls. The euro was trading around 1.0925 against the dollar, while dollar / yen was around 119.50.

The euro had received a boost yesterday after talks between the IMF Managing Director Christine Lagarde and Greek Finance Minister Yanis Varoufakis in Washington appeared to signal that Greece would honor its obligations to its lenders.

Looking ahead to the remainder of the day, some final PMI indicators will be released out of the Eurozone, as well as UK Services PMI. Today marks the day when most European markets return to work after the Easter holiday break on Friday and Monday. The US session will be relatively quiet in terms of news except a speech by regional Fed President Kocherlakota and JOLTS job openings for February.

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