Aussie Soars After RBA Pause, Euro Soft on Greece

Aussie jumps sharply today and hit new record high against Euro after RBA unexpected left rates unchanged at 4.25%. The RBA unexpectedly left the cash rate unchanged at 4.25% in February, in contrast with consensus of a rate cut by -25 bps. The decision, in spite of growing uncertainty in the sovereign debt crisis in the Eurozone, indicated policymakers' confidence in China's demand and US' economic recovery. The Australian dollar soared after the announcement.

AUD/USD breaches recent high and is pressing 1.08 level while EUR/AUD dived to new record low at 1.2139 and is still in progress for 1.2 psychological level.

On the other hand, the Euro remains soft in general on Greece uncertainties. Time is running out Greece as it's facing a massive EUR 14.5 bond payment deadline on March 20. And Greece must secure the EUR 130b second bailout from EU/IMF.

To achieve that, Greece must complete the full package by February 15 to allow complex legal procedures to be completed before March 20. And to have the full package means Greece must itself approve on banking and labor reforms, agree on PSI debt swap deal with private creditors and agree on OSI, official sector involvement. EU leaders have stepped up the pressure on Greece as they, same as the markets, are losing patience. We believe that no news would be taken seriously by the markets until something is confirmed and signed in black and white. Before that, Euro will remain soft.

The economic calendar is relatively light today. New Zealand labor cost index rose 0.7% qoq in Q4, above expectation of 0.5% qoq. UK BRC sales monitor dropped -0.3% yoy in January. Japan leading indicator improved to 94.3 in December. German industrial production and Canadian building permits will be released today. Fed chairman Bernanke will return to Capitol Hill and testify before Senate Budget Committee on US economic outlook today.