Heavy Fall for AUD as RBA Signals Inflation Already Peaked
AUD
AUD fell heavily in the last 24hrs initially off the back of the RBA’s cash rate decision yesterday afternoon and then US Central Bank chatter overnight (see below). Asian equities were mixed on Tuesday with the Hang Seng down 0.9% and Nikkei adding 0.3%. The ASX gained 0.5%. Commodities were in the red with Gold -0.1%, Silver -0.3% and Iron Ore down -0.4%. Yesterday’s rate hike decision saw an expected 25bps increase, bang on expectations to raise the cash rate to 3.6%. Commentary from the RBA Rate Statement said “The Board expects that further tightening of monetary policy may be needed to ensure that inflation returns to target”. This implies they are no longer certain that two or more hikes will be coming and we may be a step closer to discussing a pause. Economists are suggesting there could potentially be one final hike coming to take rates to 3.85% however, it is definitely far from certain at this point. This morning we have RBA Gov Lowe Speaking which could potentially give us more insight into the RBA’s intentions for future expansionary or contractionary measures for the economy to lead on from the data release we saw yesterday.
USD
AUDUSD saw a massive top-to-bottom drop of over 1 1/2 cents in what was a torrid 24hrs for the AUD, currently opening up at 0.6588 which is 4 month lows. Equities closed lower with Dow Jones -1.7%, the S&P 500 -1.6% and the NASDAQ -1.3%. Fed Chair Powell was notably hawkish in his speech this morning, saying that inflationary pressures were higher than at the previous FOMC meeting with the Fed prepared to increase the pace of rate hikes even further if it was warranted. He also noted that the peak rates are likely to go higher than expected and generally maintained a hawkish stance throughout the entirety of the talk. The USD was well supported in the aftermath of the comments as US yields increased with markets upping the bets on a more sustained interest rate hiking cycle. Looking ahead and tonight we have ADP’s Non-Farm Employment Change expected at 197k quite drastically higher than its previous print of 106k. This data is important because it provides an early look at employment growth usually a few days ahead of government released employment data which will be released on Saturday. FED’s Powell will talk again tomorrow at 2am as well JOLTS Job Openings data will be released as well expected at 10.58M.
EUR
AUDEUR fell over 1% last night opening up to its current low of 0.6234 the lowest point in over a year. European equities closed the session lower with the CAC 40 down 0.3% and Euro Stoxx 50 falling 0.2%. In the Eurozone data, 12-month consumer inflation expectations printed at 4.9%, missing expectations of 5%. Tonight, we have quarterly final employment change data for the Eurozone expected flat from previous at 0.4%. As well revised quarterly GDP data expected to show 0% growth for Q4 last year. German Retail Sales is expected at 2.3% and Italian Retail Sales expected at 0.2%. Unfortunately Euro data looks very light on for the rest of the week.
GBP
AUDGBP opens lower by almost 50 pips at 0.5552 this morning after one-way traffic since yesterday's open. UK equities closed lower at -0.1%. On a data front we had BRC Retail Sales which printed at 4.9% better than its expected of 4.8%. Halifax HPI data also printed marginally better at 1.1% from its -0.3% expected. Tonight, MPC member Dhringra will talk at 8:30pm in what is a light data calendar from the UK.
NZD
AUDNZD fell off its stool last night, down a full cent from 1.0861 to 1.0782 as a result of the commentary from the RBA yesterday afternoon (see AUD section above). This morning's GDT Price Index from NZ showed that milk prices declined by 0.7% since the last auction two weeks ago, which at that time also showed "White Gold" prices decreasing by a previous 1.5%. The next Kiwi data isn't due until Friday morning.