RBA to Hold Rates as Hiring Burst Continues
AUD
The AUD keeps steady to start the week against the majors, despite a strong performance from commodities, with Crude Oil closing up 3%, Nat Gas up 3.3%, Iron up 0.3%, Copper up 1.4%, Gold flat and Silver down 0.1%. Asian equities also performed well, with the ASX up 0.6% and the SHANGHAI COMP up 1.2%. Yesterday saw an uptick in the Melbourne Institute Inflation Gauge m/m, growing from 0.1% to 0.3%, a 3-month high, and ANZ Job Advertisements m/m saw a 0.3% gain. Today at 2:30pm will be the release of the RBA Cash Rate decision, expected to hold at 4.35%, as well as the RBA Monetary Policy Statement and Rate Statement. Future’s markets are pricing in 20% odds of a 25bps cut by year-end, with 25bps of cuts only fully priced in by May 2025. Reasons for another Cash Rate hold include still-elevated inflation (trimmed-mean CPI at 3.5% y/y) as well as five consecutive months of jobs growth exceeding expectations. Focus will be on the tone of the RBA’s commentary at the 3:30pm Press Conference, and whether that shifts down to a more neutral stance, which would increase the chance of a cut in the near term.
USD
The AUDUSD keeps steady ahead of the upcoming Presidential election in the US, keeping in a tight range yesterday, opening this morning at a rate of 0.6580. Wall Street sees a small retreat yesterday, with the DOW JONES closing down 0.5%, S&P 500 down 0.1% and the NASDAQ Closing flat. It was a slow start to the week, with Factory Orders m/m coming in close to expectations, not impacting markets. Tonight will see the ISM Services PMI, expected at 53.8, reflecting further expansion in the US services sector (which accounts for the majority of their GDP). The main event tonight will be the US election, with a very tight race in the polling, and Trump’s lead in the betting markets starting to slip to only a small favorite. Trump’s protectionist policies have economists expecting his election to bring further USD strength.
EUR
The AUDEUR sees small volatility yesterday, with the rate seeing a small spike during the open, then retreating throughout the day, opening this morning at a rate of 0.6054. European equities saw red to finish the day, with the CAC closing down 0.5% and the DAX down 0.6%. Yesterday saw 5 Manufacturing PMI figures released from the Eurozone, with all coming in contractionary as expected, with only Spanish to see expansion, and overperforming the estimates at 54.5. This shows a continuing trend from Europe, a weakness in the manufacturing sector throughout the Eurozone. Tonight will see French Industrial Production m/m, with expectations that it will show a slide into contractionary territory, adding to the poor industry performance seen in Europe.
GBP
The AUDGBP sees a small drop, with the rate slowly stepping down throughout yesterday, opening this morning at 0.5078. British Equities were soft into the close, with the FTSE dropping 0.1%. Yesterday saw no news released, with today being rather quiet on the news front. Final Services PMI is expected to remain unchanged at 51.8, with all eyes looking ahead to this Thursday’s rate decision. A 25-basis point cut expected, with any hopes of a larger cut smothered by the high spending budget that was released, with the budget seen as inflationary.
NZD
The AUDNZD sees gains yesterday, with the pair grinding higher yesterday, opening this morning at a rate of 1.1014. Earlier this morning saw the release of the RBNZ Financial Stability Report, noting that households and businesses are feeling financial pressure and the rising unemployment is posing challenges for some borrowers. Later today will see ANZ Commodity Prices m/m, previously 1.8%, with traders eying this Wednesday’s employment report, with forecasts that Unemployment Rate expected to rise by 0.4% to 5%.