Will the delayed general budget speech become a tailwind for the dollar-yen rise?! ~ February 5 highlights and event schedule ~

Yesterday, at the start of the week with China’s Lunar New Year and the peak of American football’s “Super Bowl” reducing liquidity and making moves sluggish, the dollar-yen pair nonetheless rose, pulling in stops. Last week’s strong employment report provided a tailwind for stock prices, with the three major US stock indices rising and long-term interest rates increasing.

◎ Today's Points of Focus

1) RBA Policy Rate Announcement

Today the RBA policy rate announcement is scheduled. The expectation is for a hold, but attention will be on the未来 stance. In remarks from RBA officials, the next move is said to be a hike, but the market has started pricing in a rate cut.

The RBA has kept rates low in consideration of the Australian economy. Mortgage loans have been a bottleneck, causing hesitation to raise rates. Amid this, major Australian banks like Westpac and the National Australia Bank have raised rates (mortgages). This makes further rate hikes harder for the RBA, and expectations are growing that they might cut to ease mortgage burdens.

I still think they will hold for now, but the statements in the accompanying communique and the post-announcement press conference by the new RBA Governor Lowe will be watched for their stance. As before, if the next move is a hike and hawkish, that would be positive, but if the next move is unclear or a cut and dovish, the AUD could fall sharply.

2) General State of the Union Address

Originally scheduled to be delivered last month, the State of the Union address was postponed due to clashes with Democrats and a government shutdown. President Trump’s goals and policies for this year will be announced. My personal view is that President Trump aims to implement his pledges no matter what. The focus is on what he will say in the address and what he plans to execute this year.

Also, with the government shutdown looming and the budget bill expiring on the 15th, a new budget agreement will be required. The funding for the border wall with Mexico is likely to be a bargaining chip.

◎ Today's Event Schedule

Tuesday, February 5

President Trump, State of the Union Address

09:30 USD: President of the Federal Reserve Bank of Cleveland, Loretta Mester, speech

09:30 AUD: Retail SalesTrade Balance・

12:30 AUDPolicy Rate/Statement Release

16:30 SEK: Sweden Services PMI

17:45 EUR: Italy Services PMI

17:50 EUR: France Composite & Services PMI

17:55 EUR: Germany Composite & Services PMI

18:00 EUR: Eurozone Composite & Services PMI

18:30 GBP: Services PMI

19:00 EUR: Retail Sales

22:30 CAD: Trade Balance

23:45 USD: Markit Composite & Services PMI

Wednesday, February 6

00:00 USDISM Non-Manufacturing PMI

03:00 USD: 3-Year Note Auction

10:30 AUDRBA Governor Lowe Speech