RBA Expected to Raise Rates by Half a Percent Today

AUD

The Aussie has had another 24 hours of mixed trading conditions against the majors amid quieter market conditions as the US shuts for Labor Day celebrations. Yesterday the ASX closed in the green up 0.3%, followed similarly by the Shanghai Comp up 0.4%, with the NIKKEI lagging behind losing 0.1%. Commodities fared worse with Gold losing 0.2% and Iron Ore down 0.3%. Australian data was slim over the last session with only minor releases from our region, most prominently Retail Sales m/m coming in flat, MI Inflation Gauge m/m printing -0.5 in reactionary conditions against a previous of 1.2%. Out of China we saw the release of the Caixin Services PMI above expectations at 55.0, flat with previous and 1 point above expectation. Out of China the CCP said it will accelerate its stimulus rollout in the third quarter as it tries to recover from a second quarter marred by pandemic-related losses, while the city of Guiyang locks some areas back down in an attempt to contain more Covid outbreaks. Looking ahead the big-ticket item of the day will obviously be the RBA Rate hike decision, with most economists expecting a 50-basis point increase which would move the Cash Rate to 2.35%. Futures market yesterday afternoon were pricing in 41.6bps of an increase. Market watching for signals from Gov Phil Lowe that the pace of rate hikes will be slowing in the near future.

USD

AUDUSD has reclaimed the 68 handle ahead of this afternoon's RBA rate decision, gaining support this morning on the back drop of solid Chinese and local data yesterday, opening at 0.6810 at time of writing. No data to report from the US overnight given the Labor Day Holiday, stock market were also closed. Tonight we have Final Services PMI expected at 44.3, 0.2 above previous and ISM Services PMI predicted at 55.4 against a previous of 56.7. Last night European equivalent Services PMIs missed the mark (see below). With the RBA decision now only a few hours away, support here sits at 0.6680 with resistance approaching 0.6850. 

EUR

The AUDEUR pair trades flat despite and less than stellar last 24 hours for The Zone in terms of data releases, currently trading at 0.6851 at time of writing. In European Equities German DAX and EuroStoxx felt the brunt of the worsening energy crisis in Europe with the former closing 2.3% lower and the latter close behind down 2. 2%. Only the CAC fared slightly less terribly, down -1.2%. Large protests in Prague rattle the region with tens of thousands of Czechs hitting the streets in solidarity against the government to demand more state help with rising energy bills, the largest manifestation of public discontent over the worst cost-of-living crisis in three decades. EURUSD continued to deteriorate, setting fresh 20 year lows of 0.9876 overnight. To the data, and all Services PMI prints from each individual European nation missed expectations with the exception of Italy. With Final Services PMI for the Eurozone printing at a contractionary 49.8 against the expected 52.5, which is the worst result in over a year. Meanwhile Retail Sales m/m came in at 0.3% as expected. Looking ahead this afternoon we will see the release of the German Factory Orders m/m print which will wrap up the day for the region.

GBP

The AUDGBP comes off 5-year highs at 0.5925 to currently be trading just below the 0.59 handle at 0.5895 at time of writing. Surprisingly in equities the FTSE closed slightly in the green up 0.1% while the bourses across the channel suffer. Last night the Final Services PMI print missed the mark coming in at 50.9 against expectations of 52.5 and a previous of the same. Finally a decision has been reached in the race for PM with Liz Truss winning the party vote to be the next UK Prime Minister with approximately 81.3k votes to 60.4k for Sunak. While speaking afterwards, Truss said she will govern as a conservative and will deal with energy bills and supply. Also overnight, BOE’s member Mann expressed concern that gradual rate hikes were not curbing inflation and that a 75bp move at the coming meeting should be considered. In other UK news, in light of discussions over Energy Poverty many citizens threaten not to pay their electricity bills in an attempt to force the governments hand in the rising cost of living crisis due to energy prices. Looking ahead today we will see the Construction PMI print at 6:30 expected 0.9 below previous of 48.9 which will wrap up the day.

NZD

The Aussie Dollar trades flat against the Kiwi Dollar currently at 1.1158 at time of writing. A quiet one from across the ditch with news quite light on from NZ, with not much to be seen today and only the GDT Price Index set for a tentative release sometime tomorrow.