Will the RBA Pause Rate Hikes Today?
AUD
The Aussie dollar has soared upwards overnight, opening up across all the major currency pairs as a few events went in the AUD's favour. Risk sentiment was improved, illustrated by Asian equities which were trending upwards with Nikkei adding +0.52%, Hang Seng + 0.04% and Shanghai Comp +0.7%. The ASX also had a strong day, gaining +0.6%. Commodities closed mixed, Gold was slightly down -0.1%, Silver + 0.1% and Iron Ore -0.4%. Yesterday Aussie Retail Sales offered no surprises, printing at 0.2% for February which was bang-on expectations. Today is set to be an important day for the AUD with the Cash Rate and RBA Rate Statement set for release at 2:30pm. Markets have been divided between a forecast of a pause in rate hikes, or continuing with an increase of 25 bps. Most economists say one more hike is necessary, however futures rate markets are indicating only 4bps of tightening is priced in. Due to this uncertainty, there is a chance for some volatility across the release at 2.30pm.
USD
The AUDUSD steamrolled higher overnight, gaining almost 2% from bottom to top, opening this morning at 0.6788 which is the highest it's been in over a month. The gains started early yesterday afternoon with risk sentiment steadily improving and then solidified in the evening with weak US data; the ISM Manufacturing PMI missing the mark, coming in 1.2% lower then expectations at 46.3. US Equities closed mixed with the NASDAQ -0.3%, S&P 500 +0.4% and the Dow Jones +1.0%. The U.S two year yields continued to drop with the USD, falling 5 bps to 3.97%. Today's RBA rate decision (see above) could heavily influence intra-day movements today, and looking forward to tonight and we have JOLTS Job Openings and FOMC Member Cook speaking in the early hours of the morning.
EUR
Volatility has also been injected into AUDEUR, which enjoyed significant gains overnight to touch 2-week highs of 0.6236 before opening slightly off this mark at 0.6223 this morning. European equities were mixed on close with the Euro Stoxx 50 up 0.1%, DAX -0.3% and CAC +0.3%. In early data, German Manufacturing PMI printed at 44.7, up from a preliminary reading of 44.4. Euro-area Manufacturing PMI was also revised higher to 47.3 from 47.1. EURUSD was sharply higher in the aftermath, adding to some of the overnight USD weakness. Adding to the support for EURUSD were hawkish comments for ECB’s Holzmann who said that a 50bps hike was still on the cards for May and that the OPEC+ decision to cut oil production would likely add to inflation. Looking to tonight, and we have PPI m/m tipped to come in at -0.5%, an improvement on last month's figure of -2.8%,
GBP
The AUDGBP showed similar upside through the night, reaching a high of 0.5479, a high it hasn’t reached in two weeks. UK Equities closed higher with the FTSE +0.5%. To the data, with a similar schedule to Europe the UK released their Final Manufacturing PMI coming in 0.1 below forecast at 47.9, the results of which were negligible. Looking forward and Monetary Policy Committee member Tenreyro speaking at the Royal Economic Society Annual Conference today, and Final Services PMI set for release tomorrow, also tipped to remain flat from last months release of 48.0.
NZD
AUDNZD saw a peak at 2-week highs of 1.0791 overnight, before opening slightly off the boil at 1.0771 this morning. IN what will be a big 2 days for this pair, movements today will be guided by the RBA's rate decision this afternoon. However a big day to follow tomorrow, with the Official Cash Rate in NZ set to raise by a further 25bps to 5.00%. Following this is the RBNZ Rate Statement to provide guidance to potential future monetary policy movements.