Forex – Aussie weaker ahead of RBA review, with rate cut chances eyed

Investing.com — The Australian dollar eased in early Asia on Tuesday ahead of a central bank rate review, the first this year after skipping January as is the practice.

AUD/USD traded at 0.7793, down 0.13%, while USD/JPY changed hands at 117.66, up 0.09%. EUR/USD traded at 1.1337, down 0.04%.

The Reserve Bank of Australia holds center stage in Asia with they latest monetary review at 1430 Sydney time (0330 GMT). Views are mixed on a possible cash rate cut from a record low 2.50% with the market pricing about a 65% chance of a 25 basis points cut.

Before that, at 1130 (0030 GMT), December trade and building approvals data are due. Trade data for December is expected to show a slightly narrower deficit of A$775 million compared with -A$925 million in November. For building approvals, the median consensus currently is for a fall of 5.0% month-on-month.

Overnight, the dollar slid lower against the other major currencies on Monday, after data showed that manufacturing activity in the U.S. expanded at the slowest rate in 11 months in January.

In a report, the Institute for Supply Management said its index of purchasing managers fell to 53.5 last month from a reading of 55.5 in December. Analysts had expected the manufacturing PMI to decline to 54.5 in January.

The data came after the Commerce Department said that personal spending fell 0.3% in December, worse than expectations for a decline of 0.2%. Personal spending rose 0.5% in November, whose figure was revised down from a previously reported gain of 0.6%.

The report also showed personal income rose 0.3% in December, above forecasts for 0.2% and after gaining 0.3% in November.

Sentiment on the greenback became vulnerable on Friday after the Commerce Department said in a report that the U.S. economy expanded 2.6% in the final three months of 2014, below expectations for a 3.0% gain and slowing sharply from growth of 5.0% in the three months to September.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted at 94.77, down 0.05%.