Economists Expect a 25 Basis Point RBA Hike Today
AUD
The Aussie Dollar was on the backfoot against all the majors overnight, losing to all of its counterparts barring the JPY after some strong data and hawkish commentary from overseas. Asian equities were higher on the close with the Hang Seng outperforming its peers up 4.5%. The ASX finished Monday’s session +0.3% buoyed by energy and materials stocks which advanced after China eased more Covid restrictions. In lower tier data locally and from Asia, the Melbourne Institute Inflation gauge posted at 1% for November vs 0.4% previous, whilst China’s Caixin Service PMI came in at 46.7, lower than the expected figure of 48.0. The focus today lies on the RBA at 2:30pm, which will hand down its final Cash Rate Statement for the year, with markets holding varied opinions on what the interest rate will move by, 15 basis points would take the Cash Rate to 3% flat. A 25bp or even 50bp hike are certainly not out of the question after last week Governor Lowe noted that “the Board expects to increase interest rates further over the period ahead. We are not on a pre-set path though. We have not ruled out returning to 50bp increases if that is necessary.” The RBA will not meet again until February 2023 and could take the hiatus into consideration. The majority of economists are expecting a 25 basis point hike.
USD
The AUDUSD tanked over an entire cent last night after firmer than expected services data from the US weighed on bond and equity markets, plunging the pair to trade at 0.6698 this morning. The NASDAQ was trading -2.2%, the S&P 500 -2.0% and the Dow Jones lost -1.6% by the closing bell. The trading pairs risk profile turned bearish on Monday after the US reported better-than-projected US ISM Services PMI data, which soared to 56.5, higher than the projections of 53.1 and the prior release of 54.4. Combined with Friday’s robust Nonfarm Payrolls data has renewed fears of a bigger rate hike announcement by the Federal Reserve in its December monetary policy meeting. Also of note were US October Factory Orders coming in at 1.0% to beat estimates of 0.7% with Durable Goods Orders revised up to 1.1% from 1.0%. US Trade Balance is the only piece of data from the US tonight, forecasted to come in at -80.1B.
EUR
The AUDEUR trading southbound, similarly losing over a cent last night as a broad-based sell-off of the Aussie swept markets, trading at 0.6383. European equity markets drifted lower into the close with the CAC and DAX both closing down around -0.6% by close of trading. A handful of European data was released overnight with less weight held, with Finalised German Services revised down to 46.1 from 46.4, whilst EU Services were revised down to 48.5 from 48.6 with Composite steady at 47.8. Of more importance, multiple ECB speakers crossed wires overnight. The main headlines were Portugal’s Centeno saying that the inflation peak may be reached in the 4th quarter. We then heard from ECB’s Makhlouf who said a 50bps December hike is the minimum necessary, adding that the ECB must be open to restrictive rates for a period. Eurozone October Retail Sales fell -2.7% y/y, more than a forecasted -2.6%. With little data set for release from Europe tonight, attention will turn to the annual Ecofin Meetings held in Brussels for any news or commentary.
GBP
The AUDGBP continued the downward trend despite a lack of macroeconomic data from the UK overnight, now sitting at 0.5486. Final UK Services PMI could offer very little excitement for markets and was unchanged at 48.8. The Construction PMI for November is set to be released tonight but it’s very likely that attention will remain elsewhere.
NZD
The AUDNZD slid but only slightly, moving from yesterday’s open of 1.0610 to 1.0604, proving to be the most resolute pair of the majors. There was no relevant data out of New Zealand yesterday and there is none penned into the books for today either. Movement in the Kiwi will rely upon dynamics from elsewhere.