RBA to Raise Rates by at Least 50 Basis Points Today
AUD
As we return from the Bank Holiday, AUD has a mixed start to the week as traders brace for the RBA’s policy decision today. Asian equities finished Monday’s session largely higher, despite poor PMI figures out of China, with the Nikkei +0.7% and Hang Seng flat. The ASX closed +0.7%, to a 7-week peak, supported by gains in energy stocks. Yesterday's local data showed the MI Inflation Gauge printing at what was its highest level on record which would have raised some eyebrows at the RBA. Following that the data was weak however, with Chinese Manufacturing PMI comfortably missing expectations and ANZ Job Advertisements showing a a reduction in the number of jobs on offer. Looking ahead to this afternoon, in what will be the main local piece of economic data for the week, the RBA is expected to announce another 50 basis point hike to 1.85% at 2.30pm to get ahead of surging inflation. The RBA is also expected to revise its inflation forecast higher and that for Unemployment lower, further affirming the case for further monetary tightening.
USD
A generally weaker USD helped the AUDUSD trade to a 7 week high of 0.7048 overnight before opening this morning slightly off the mark at 0.7030. Yesterday's US data showed US Manufacturing PMI for July was revised down to 52.2 from an initial reading of 52.3 while Construction Spending for June declined by 1.1% against expectations of a 0.2% gain. Of more importance, US ISM Manufacturing for July printed at 52.8, down from 53.0 though better than expectations of 52.0 and acting to weaken the USD. Today's RBA rate decisions (see above) will frame movements here in the next 24hours, however there is also JOLTS Job Openings tonight from the US and later in the week the Non-Farm Employment data will be revealed. Also of note in geo-political news, it was announced that US Speaker Pelosi would land in Taiwan on Tuesday night and meet lawmakers on Wednesday.
EUR
AUD remains strong here, opening slightly higher at 0.6844 here having traded as high as 0.6880 over night. AUD has gained 5.3 percent on EUR since the beginning of last month. Yesterday European equities were mixed on the open, however closed slightly down on the day. Euro-Area July final Manufacturing PMI printed at 49.8, better than the preliminary reading of 49.6, a result that was carried largely by stronger numbers from Germany and France. However German June Retail Sales in June printed at -1.6% m/m, missing expectations of 0.3%, falling at the largest annual pace since records began in 1994. Rounding out a big night of data, the Unemployment Rate for the Eurozone printed at 6.6% which was in-line with expectations. A much quieter night on the calendar tonight before things pick up again on Wednesday night with Services PMIs.
GBP
AUD opens flat here at 0.5731 in what has been lacklustre trading. Contributing to the lack of volatility here, the UK Final Manufacturing PMI came in only slightly worse than expectations, 52.1 vs 52.2 expected. The FTSE closed just shy of flat which also didn't add any impetus to currencies. This has the potential to spice up today with the RBA's interest rate decision, before the Bank of England’s own monetary policy decision on Thursday night with market anticipations for a 50bps hike which would be the biggest interest rate increase in 27 years, pushing borrowing costs to 1.75%, the highest level since 2009.
NZD
AUD opens slightly lower here after an even tussle overnight, AUD giving up the 1.11 handle to trade at 1.1093 at time of writing. Yesterday's Kiwi Building Consents showed a 2.3% drop in June's numbers. Tomorrow's NZ Employment Data will be interesting with an already miserly Unemployment rate of 3.2% expected to drop further to 3.1% in what are some of the tightest labor market conditions in developed markets.