RBA To Raise Rates Again at 2.30pm Today

AUD

The Aussie Dollar was largely down, though trading within tighter ranges in what was a subdued session to start the week off, though today's crucial RBA meeting is the marquee event of the week and a must see for currency watchers. Asian equities were mixed on yesterdays close with the Nikkei +0.56% while the ASX shed -0.45%. Losses on the ASX were driven by the technology sector and Magellan headlined falling by -14%. Commodities were mainly unchanged with Gold and Silver flat, whilst Iron Ore and Copper only losing -0.5% and -0.9% on the day. On to today’s RBA Meeting, and it is the worst kept secret that the RBA is expected to increase the cash rate target after the initial +25bps hike last month.  Market participants are split on whether the central bank will pull the trigger by another 25 bps or if it will go with a 40 bps upswing. Policymakers argued in May’s statement that the latter would be more likely. Either way, the RBA is signalling it is ready to act decisively on taming inflation. There is clear evidence that inflation is everywhere and the RBA is behind the curve, and the hawkishness among the global central bank community could be helpful for communicating such a move. All eyes at 2:30pm.

USD

The AUDUSD was weaker at open this morning, despite the lack of data out of the US overnight trading at 0.7191. Wall St made minor gains to start the week with the NASDAQ and the S&P 500 both gaining +0.4%.  U.S 10-year yield rose 10bps to 3.04% while crude oil closed slightly in negative territory. The US dollar index (DXY) is juggling around 102.40 after a sheer upside move from Monday’s low at 101.85. Going forward, investors’ focus will remain on the US Consumer Price index (CPI) data late this week. A preliminary estimate for the annual CPI figure is 8.2% against the prior print of 8.3%. It is worth noting that despite the continuous elevation of interest rates by the Federal Reserve, price pressures are holding themselves above the 8% figure, which raises concerns over the confidence of the consumers in the US economy. No other major data to report on from the US in near future.

EUR

The AUDEUR had little to be excited for with ranges trading thin overnight, still hovering above the 0.67 handle and trading at 0.6724 at time of writing. Part of the reason for the dull start to the week was due to key European stakeholders Germany, France and Switzerland all on extended weekends. European Equity markets closed higher on the day with +1% gains for the FTSE and CAC while the DAX was +1.3% higher at the closing bell. European data won’t start to trickle out until late tomorrow evening with the ECB’s all important Monetary Policy meeting on Thursday the key driver in markets.

GBP

The AUDGBP lower this morning, though only with minimal losses as it moved to 0.5740 overnight. Little to talk about from the Britts as the UK likely still recovering from the hangover after Queen Elizabeth’s Platinum Jubilee celebrations. Only factor of note was Boris Johnson still maintaining Parliament's Vote of Confidence. After 359 ballots were casted, 211 voted in having confidence vs.148 who were not confident in BoJo’s abilities, a majority of just 63, a disappointing result which will provide food for thought for the leadership party. He is now immune for a year before another confidence vote can be called but many believe his leadership is now in jeopardy. Long term readers will be reminded of Teresa May (the previous UK PM) surviving her own 2019 vote of no confidence during Brexit. It was not long after that she tendered her resignation. 

NZD

The AUDNZD not deviating far from the rest as the majority of movement is sideways as the Kiwis also enjoyed a bank holiday yesterday. It will be interesting to see how the RBA compares to the RBNZ today, with the pace of hiking interest rates by the RBNZ much faster than other Western leaders. Therefore, the RBNZ will reach neutral rates sooner than other major central banks. It would be worth seeing whether the quick rate hikes by the RBNZ will perform the required job effectively or not, and if that could influence other banks in coming months.