Chance of interest rate move in either direction now even: RBA governor

Aussie dollar tumbles; U.S. shutdown jitters dent stocks

Aussie dollar tumbles; U.S. shutdown jitters dent stocks

• RBA's Lowe opens the door for a rate cut and prompts some aggressive selling.

Wall Street's benchmark S&P 500 slipped on concerns over growth, disappointing earnings reports and another possible US government shutdown in the wake of President Donald Trump's State of the Union address on Tuesday.

The Aussie hovered near a more than one-week low at $0.7103, having lost 1.8 percent in the previous session, its largest percentage decline in more than a year. The U.S. 10-year yields fell 1 basis point to 2.69 percent.

"We are starting to see central banks follow (Fed Chair Jerome) Powell's lead", said Chris Gaffney, president of world markets at TIAA Bank in St. Louis.

The Australian dollar languished near a two-week low on Thursday on rising bets that interest rates would most likely come down this year amid heightened growth risks at home and overseas. Lowe said "downside risks" in Australia "have increased", although he still expects the Australian economy to grow "at a reasonable pace". We have had an on-hold view for the cash rate for 2019 and 2020 for some time. We maintain this view, but think the risks of a rate cut have grown considerably. "Further growth downgrades from here will be highly significant for the policy outlook".

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Other than that, as mentioned earlier, just keep an eye on risk sentiment as the fall in AUD/JPY today may be a bellwether for further direction in risk assets/equities in the session ahead since the currency pair in itself is typically a barometer for risk.

Mr Lowe said economic growth could weaken this year and next, on the back of falling house prices and stagnant consumer spending.

The RBA has kept its cash rate at a record-low 1.5%, seeking to play a stabilising role in the economy and willing to ride out weak inflation to avoid encouraging heavily-mortgaged households from borrowing further.

"BoE Governor Mark Carney will reiterate his warning about the risks of a disorderly Brexit and reassure investors that they are ready to increase stimulus if it causes a major disruption in the markets", added Lien.

Meanwhile, the S&P/ASX 200 index traded 0.96 percent higher at 6,044.50 by 04:00 GMT, while at 04:00GMT, the FxWirePro's Hourly AUD Strength Index remained highly bearish at -123.52 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend).

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