RBA Surprises Markets, RBNZ Up Next?

AUD

The AUD trades predominantly lower this morning, barring against the USD, after a somewhat surprisingly miniscule rate hike from the RBA yesterday. Asian equities were mixed on Tuesday’s close with the Hang Seng -0.8% and Nikkei +3.0%. The ASX finished the session +3.75%, in its strongest session in more than 2yrs, after the RBA surprised markets. A strong performance in commodities as strength was seen from Iron Ore gaining +1.4%, and Copper being the star performer gaining +2.5%. In data yesterday, the AIG Manufacturing Index climbed from 49.3 to 50.2 in September. However, the showstopper for markets was the RBA Cash Rate Decision. The RBA raised the cash rate by 25-basis points to 2.60%, not quite meeting many forecasters predictions of a 50-basis point hike to 2.85%. Commentary from RBA stated that a further increase in inflation is expected over the months ahead before inflation declines back towards the 2-3% range and the size and timing of future interest rate increases will continue to be determined by the incoming data and the outlook for inflation and the labor market. In China, the world’s largest metals consumer, there’s speculation Beijing may soon start relaxing its strict approach to containing the virus. Looking ahead, we have Retail Sales m/m being released this morning at 11:30am.
 

USD

AUDUSD trades sideways this morning, having touched 1-week-highs of 0.6547 before coming back down and barely hanging onto the 0.65 handle, trading at 0.6501 at time of writing. Wall Street enjoyed another strong session overnight with the NASDAQ gaining +3.3% while the S&P 500 closed +3.1% higher. U.S yields edged fractionally lower while Oil gained advanced a further +3.1% to $86.20 a barrel. In data yesterday, the US ISM Manufacturing PMI for September 2022 printed below market expectations but showed overall expansion in the US manufacturing sector, coming in at 50.9 compared to expectations of 52.5. Last night, JOLTS Job Openings were released, coming in at 10.05M, compared to expectations of 11.07M. Looking ahead, this evening we will see ADP Non-Farm Employment Change released.
 

EUR

AUDEUR trades significantly lower this morning, having lost both the 0.66 and 0.65 handle, dipping briefly to 7-month-lows of 0.6485 before recovering to trade at 0.6509. A stellar session for equities out of Europe, with the DAX and CAC gaining +3.8% and +4.2%, respectively. Yesterday, a slew of data was released without significant impact on markets. PPI m/m was released, coming in bang-on expectations of 5.0%. Last night, ECB President Lagarde hit the wires, stating “'It’s difficult to say if inflation is at its peak and I am not going to venture there.” Looking ahead, a number of countries will be releasing their Final PMI data, including Germany, France, Spain and Italy.
 

GBP

AUDGBP trades lower this morning, having tumbled down to 2-month-lows of 0.5643, before recovering slightly to trade at 0.5662 at time of writing. A positive session for UK equities, with the FTSE gaining +2.6%. A quiet day in data yesterday, however BoE’s Mann crossed the wires, stating she voted for 75 bps rate hike in September because of inflation expectations, Sterling depreciation, energy cap impact and other factors. Looking ahead, the UK will release Final Services PMI which is tipped to come in at 49.2, as well as the 10-y Bond Auction.
 

NZD

AUDNZD trades lower this morning, having dropped to 2-and-a-half-week-lows of 1.1304, before improving slightly to trade at 1.1347 at time of writing. In data yesterday, NZIER Business Confidence was released. The latest NZIER Quarterly Survey of Business Opinion (QSBO) suggests that businesses are still feeling downbeat in the September quarter, but they are also starting to see the light at the end of the tunnel. On a seasonally adjusted basis, a net 42 percent of businesses surveyed expect deterioration in general economic conditions over the coming months – a considerable decrease from the 62 percent in the June quarter. Early this morning, we saw GDT Price Index released, missing a previous result of 2.0%, coming in at -3.5%. Today the Official Cash Rate will be released, and New Zealand’s central bank is poised to raise interest rates 50-basis points for a fifth straight time, and some economists are tipping it will need to keep tightening well into next year as an aggressive Federal Reserve weakens the kiwi dollar.