AUD Piggybacks on Higher Interest Rates
AUD
The Aussie Dollar is fighting back against its recent demons and was green across the board after the RBA raised the Cash Rate by 25 bps to 4.10% yesterday, the highest it’s been in 11 years. Asian equities were mixed on Tuesday with the Nikkei adding +0.9% while the Hang Seng fell by -0.2%. The ASX closed the session -1.2% lower, with losses coming after the RBA hiked rates. Having paused its aggressive hiking cycle in April, the RBA hiked another 25bps, defying some market expectation to hold the rate steady. RBA Boss Phil Lowe said while inflation in the nation may have “passed its peak,” there are still indicators showing inflation persisting, and eluded to potential hikes to come, stating that “Some further tightening of monetary policy may be required”, despite highlighting the daunting task of averting recession with only “a narrow path for a soft landing”. Lowe will speak at a summit In Sydney this morning with audience questions expected. Shortly after, Australian GDP for Q1 is due today and is expected to have been relatively soft at around +0.4% q/q which would imply another decline in per capita GDP given the surge in net immigration.
USD
The AUDUSD rallied to a high of 0.6686 after the RBA meeting yesterday before easing back to trade at 0.6673 currently. Wall Street traded higher overnight with the Nasdaq closing +0.3%, the S&P 500 +0.2% and the Dow Jones +0.1%. U.S. 2-year yields rose 5bps to 4.52%, while crude oil fell 0.9% to $71.45 a barrel. With no data from the US overnight, the spotlight remained on the RBA’s commentary which may provide some food for thought for the FOMC’s June meeting on the 14th, especially after the back of the softer May ISM services data, where both activity and price levels supported the US recessionary narrative. The calendar remains light this week with only US Trade Balance released tonight.
EUR
The AUDEUR trading to highs not seen since mid-March in the aftermath of the rate announcement, the pair still trades at the level of 0.6240. European Equities finished the session slightly higher with the CAC and DAX putting on +0.1% and +0.2% respectively. European Retail Sales m/m were unchanged from April to May, less than the expected 0.2% gain, though the miss is muted as Germany and France’s already released data accounts for about half of the Eurozone’s economy. It remains quiet on the data front from Europe, with only French Trade Balance and Italian Retail Sales which will be unlikely to move markets.
GBP
The AUDGBP saw the same benefit and traded northbound up to 0.5370, in which there could be a mild resistance level that has formed since the beginning of May. Yesterday’s UK Construction PMI was the only release from the UK, as the construction industry just maintaining an expansionary stance by posting at 51.1, slightly better than the expectation of 50.9. Slim pickings on data tonight as well, with just the Halifax House Price Index due this afternoon.
NZD
The AUDNZD refreshing recent highs to levels not seen since mid-February, trading up to 1.0984 this morning. The Global Dairy Trade Index posted this morning at -0.9% for the second month in a row. The decline hurting the Kiwi Dollar even further as the RBA’s rate hike was the main perpetrator in the pairs upward movement. Early tomorrow morning will see NZ Manufacturing Sales released for the quarter.