RBNZ Due to Raise Interest Rates Again Today
AUD
Aussie opens mixed across the board following a night full of commentary from various central bank members and governors, with investors awaiting important economic data prints over the next 24hrs from around the globe. Asian equities were mixed yesterday with the Nikkei rising 0.6% while the Hang Seng fell 1.9%. The ASX added 0.6% with coal, oil, metals and lithium stocks rallying. Commodities were mostly green with Copper leading up 1.1% followed by Iron Ore and Silver up 0.3%, with Gold down -0.1%. In China, government health officials made covid control remarks, with reports that local governments have no ability to add layers or loosen covid controls, instead China's government health officials is guiding local officials on implementing 20 covid measures. The AUD strengthened across the board as a result. Last night, RBA’s Lowe released an ambiguous statement saying the RBA is not on a pre-set path and could return to 50bp moves or keep rates unchanged for a time. Lowe also said they need to ensure the current period of higher inflation is only temporary and more variable inflation in future will challenge central banks. A relatively quiet day in domestic data with just Flash Services & Manufacturing PMI is coming out this morning. Across the ditch the RBNZ is also having an interest rate decision today at midday which could flow over into AUD crosses (see NZD section below).
USD
AUD has steadily crept higher without overachieving, opening at 0.6645 this morning with the AUD supported by stronger commodities. Little to report in the way of US data overnight with just the Richmond Manufacturing Index that printed at expectations. Although there were multiple statements last night from various FOMC members, nothing new to spur action from markets. Bearish commentary from the OECD overnight stated that due to soaring energy prices global economic growth will slow to 2.2% in 2023. The OECD said that further monetary policy tightening is ‘essential’. In equities, the Nasdaq, S&P500 and Dow was trading up at 0.9%, 1.1% and 1% respectively. FOMC minutes from the early November meeting will be published tonight. These will provide further insight to the rationale underpinning the decision to continue to hike the fed funds rate by 75 bps earlier this month. U.S. durable goods orders for October will also be released tonight, providing an indication of how inventory levels, manufacturing activity, and business investment are trending in 4Q. Additionally, Flash Services & Manufacturing data, New Home Sales and Unemployment Claims prints tonight. University of Michigan also releases their studies on Consumer Sentiment and Inflation Expectations. With the slew of data tonight, we can expect a volatile markets tonight ahead of their Thanksgiving holiday tomorrow.
EUR
AUDEUR opens flat today at 0.6451, unable to hold its rally to 0.6476 overnight which could be attributed to hawkish commentary from ECB members. ECB member Holzmann hit the wires in favour of a 75bp hike if things remain unchanged, cohesive ECB’s Nagel who sees a ‘robust’ rate hike in December, adding that he will push to start QT early 2023. Rhen was more conservative, saying the inflation path will determine the pace of rate hikes. Data from the Eurozone didn't move markets, with only Eurozone's Current Account & Consumer Confidence releasing above expectations. European equities closed with small gains with CAC and Dax up 0.3%. Investors’ eyes will be locked into tonight’s slew of Services & Manufacturing PMI data that will be delivered from the Eurozone, Germany and France which likely create a volatile trading range.
GBP
The Aussie opens slightly lower against the Pound this morning at 0.5585, losing the 0.56c handle it briefly held overnight. Yesterday, Public Sector Net Borrowing which measures difference in spending and income for public entities printed significantly above expectations at 12.7B vs 19.1B perhaps assisting the GBP to its minor gains. FTSE closed up at 1.0%. Tonight we have more important data, Flash Services and Manufacturing PMI, releases this tonight with markets are tipping 45.7 and 48 respectively – afterwards, we’ll see commentary from MPC’S Huw Pill.
NZD
The AUDNZD continues its extended downtrend, opening this morning at 1.0800 which creates 7-month lows. The Kiwi economic calendar springs to life today with the much anticipate RBNZ interest rate decision. The RBNZ will certainly lift the cash rate further today, the only uncertainty is by how much. Market surveys are currently tipping a 75bps hike in the OCR to 4.25%, attaching roughly a two-thirds probability to such a move and one-third chance to a 50bps increase. Arguments for a 50bp hike centre on the fact that a sizeable amount of policy tightening has already occurred and much of that tightening hasn’t hit the economy yet, in part because a high share of housing loans are yet to reset to higher interest rates. Following the Cash Rate Announcement, the RBNZ will have a press conference where any loose lips have the potential to create further volatility.