RBA Pauses Rate Hikes, Will RBNZ Follow Suit?
AUD
The Aussie dollar finished slightly down against the majors after the RBA’s decision to pause hiking the cash rate, leaving it at 3.60% yesterday. The RBA's statement did not specifically say that rate hikes were done and “some further tightening of monetary policy may well be needed” and noted there was "considerable uncertainty" about the outlook. Lower than expected inflation data and Retail Sales dropping have indicated that the last year of interest rate hikes is biting consumers and inflation has peaked. Asian equities were mixed yesterday Nikkei adding +0.55%, Hang Seng -0.66% and Shanghai Comp +0.49%. ASX was slightly up +0.18% with energy and tech driving these gains. Commodities were mixed also, Gold was flat, silver +0.2, crude oil +0.7%, gas -10.5%, iron ore -0.3%, copper -1.8%. Looking forward, Governor Lowe will be speaking at the national press club today shedding some light on the direction of monetary policy and providing more colour on the thinking of the RBA on future rate decisions.
USD
The AUDUSD opens slightly down this morning, losing 1% in the wake of the RBA's interest rate decision before recovering slightly in the overnight session to open at 0.6758 this morning . US Equities closed down with the NASDAQ -0.5%, S&P 500 +0.6% and the Dow Jones -0.6%. US data last night showed JOLTS job openings dropping to 9.93m from an expected 10.49 million which is the lowest it has been since July 2021 in the peak of the pandemic. Also released, US Factory Orders for February fell by 0.7% MoM in February to come in short of expectations of a 0.5% contraction with the core measure also failing to meet expectations. AUD was able to capitalise on the weaker US data. Looking ahead, and tonight we have the ADP Non-Farm Employment figures and ISM services PMI, both data pieces are expected to worsen from last month's equivalents as economic indicators in the US appear to be deteriorating.
EUR
AUDEUR dropped 1% yesterday after the RBA decision, erasing all of the Monday's gains and opening this morning at 0.6167. European equities opened the session with modest gains with the CAC 40 +0.2% and Euro Stoxx 50 adding 0.1%. In Macro-data, Euro-area Feb producer prices fell 0.5% m/m in line with estimates, while they rose 13.2% y/y, just missing estimates of +13.3%. EUR continued to strengthen in the aftermath as it is evident more interest rate hikes are necessary to curb runaway prices in Europe. Looking forward, some low tier data coming out today including German factory orders m/m, French industrial production m/m and Services PMIs from the major European economies.
GBP
AUD gains here were very short lived, this pair completely capitulating after the RBA decision yesterday, dropping to fresh 23-month lows to open this morning at 0.5389. The FTSE finished 0.5% lower and there was a lack of macro data from the UK. The BOE’s Tenreyro spoke, saying she expects the high current bank rate will require an earlier and faster reversal to avoid a significant inflation undershoot. She continued saying a looser stance is needed to achieve the inflation target. The GBP went sideways after these comments. Looking ahead and we have the Services PMI in-line with the rest of Europe, as well as the BoE's quarterly bulleting and MPC Member Tenreyro is speaking again.
NZD
In a familiar story this morning, AUD is on its haunches against NZD, having given up the 1.07 handle overnight, opening at 1.0698 as I write. Today is the second big day ion a row for this pair, with the RBNZ due to announce its interest rate decision at midday today. Markets are expecting the cash rate to go higher by 25bps to 5.00%. The RBNZ's previous policy statement was extremely light on guidance and the swing factor today should be whether the statement plants the suggestion that the end of the tightening cycle is approaching. NZD buyers will be desperately hoping that the end to the Kiwi rate hike cycle is not too far away.