AUD Mixed in Aftermath of RBA Rate Hike
AUD
The Australian Dollar had a mixed performance of trade overnight and posted with varied levels among the G10s. Asian Equities were quite diverse on the close with the Shanghai Comp closing with next-to-no movement while the Nikkei gained +1.0%. Domestically, the Australian share market rose for the second straight day as the reserve bank lifted interest rates, as was widely expected. The ASX 200 gained +0.3% on the close. In the event on Tuesday, RBA Governor Philip Lowe elevated the Official Cash Rate (OCR) by 50bps to 1.35%. Regarding the RBA’s decision, the bank said that the size and timing of further hikes would be guided by upcoming data and the boards assessment of the inflation outlook. The RBA also noted a tight labor market as well as capacity constraints in some sectors. This is the third consecutive rate hike announcement by the RBA, notably highlighting the aggressive work on containing Australia’s domestic price pressures which were recorded at 5.1% in the first quarter of CY2022. To the data ahead, there is little to report on domestically. Traders should take note of the upcoming US calendar (see below).
USD
AUDUSD struggled to capitalize on yesterday's intraday gains which peaked at 0.6895, before selling pressure dragged the pair back down in volatile conditions, trading at 0.6799 at the time of writing. US Equities start the week coming off their worst half since 1970, Dow Jones dipped -0.4% on the close while the NASDAQ gained +1.7% and the S&P 500 closed with modest gains of 0.2%. Released in the NY session and on the low tier front, US May Factory Orders rose 1.6% MoM to beat forecasts of a 0.5% increase while Durable Goods Orders were revised up to 0.8% from an initial reading of 0.7%. Looking ahead, the FOMC will release the meeting minutes from their mid-June meeting today. The release of the minutes will provide a detailed clarification on the prior rate hike by the Fed. Traders may also be particularly focused on any rhetoric surrounding additional hikes such as the magnitude and any detail surrounding estimations for how high the fed rates will need to rise to curb inflation. Finally, ISM Non-manufacturing PMIs and JOLTs Job Openings will be unveiled.
EUR
AUDEUR attracted a bid tone overnight, gaining momentum to reclaim the 0.66 handle to refresh a weekly high of 0.6623 at the time of writing. European Equities tumbled as rising worries and fears of globalized recession took their toll, with recent data showing signs the EU growth has closed to a 16-month low in the midst of an energy crisis. The German DAX index closed -3% on the close, while the French CAC fell -2.8%. To the Eurozone data, In France, June Final Services PMI was revised down to 53.9 from 54.4. Eurozone June Final Services PMI was revised up from 52.8 to 53. Moving on to the data ahead, European Commissions economic forecasts and Eurozone Retail Sales for May will offer immediate directions ahead of the FOMC Minutes out of the US.
GBP
AUDGBP had quite a tumultuous trading session throughout Tuesday after dipping to a low of 0.5633 before gaining positive momentum to trade at 0.5682 at the time of writing. It was a relatively calm trading session for the London’s FTSE 100 as it underperformed, the London Benchmark was down -0.20% on the close. Into the session on Tuesday, the Bank of England (BoE) has said the global outlook has deteriorated, adding that the downside risks could hurt the UK’s financial stability and stated that inflation will squeeze UK household finances further. Little in the way for the Pound. Given the popularity of recent political plays in the UK, traders may pay close attention to fresh political news for fresh impetus as well as the FOMC Minutes and US PMIs.
NZD
AUDNZD tumbled on Tuesday evening and lost almost 60bps, hit by broader US dollar strength and global risk aversion. To the data this morning, The Global Dairy Trade (GDT) index dropped by -4.1% following its latest trading event, marketing the second consecutive fall in the index. Looking forward, RBNZ will again release their statement of intent on Thursday. The next RBNZ meeting is in one week from today with markets currently expecting a 50bps rate hike.