RBA Interest Rate Decision Today

AUD

The Aussie Dollar opens a little higher against most major currencies when compared to this time yesterday. This comes despite significant AUD weakness yesterday afternoon, driven by sizeable deterioration in global risk sentiment and mounting fears of a global recession. Asian equities shared a similar fate, with the ASX down 3.7% and the SHANGHAI COMP closing down 1.5%. Japan's stock market fell by -12.4%, the most in 37 years. Commodities managed to close mixed, with Oil up 0.4%, Nat Gas down 3.1%, Gold up 0.1% Silver up 0.4%, Iron ore up 0.5% and Copper down 2.4%. Locally we had the PPI q/q released coming in as expected at 1%, previously at 0.9%. Caixin Services PMI came out yesterday higher at 52.1, expected at 51.4 from 51.2. This afternoon we have the much-awaited RBA Cash Rate decision, with expectations that it will remain unchanged at 4.35%. At the front end of last week, futures markets were pricing in 28% odds of an interest rate hike today, although these odds fell to 2% off the back of a weaker-than-expected inflation reading on Wednesday. Following this, we have the RBA Monetary Policy Statement and RBA Rate Statement, which should give some clarity in the direction the RBA wants to go moving forward. As markets are now expecting 3 cuts before end of 2025, this is a sharp deviation from the potential hike that was being mentioned only a few weeks ago; the central bank's commentary should steer markets in which direction they are looking.
 

USD

The AUDUSD manages to open the day a little higher, with the pair seeing a surge in volatility yesterday, dipping nearly 2.5% to the 0.6350 barrier, before retracing to this morning’s open of 0.6511. This comes after fears of a global recession surged, with markets letting go of risk-sensitive currencies (e.g. AUD) and opting for safe-haven assets (e.g. USD). Blood was seen on Wall Street, with the DOW JONES down 2.6%, S&P 500 down 3% and NASDAQ leading, down 3.4%. Sparking the increased fear was Friday evening's weak US labour report, showing an unexpected, sharp increase in unemployment and lower-than-expected employment activity, pointing to a struggling US economy. Average Hourly Earnings m/m came in lower at 0.2%, expected to remain at 0.3%. Non-Farm Employment Change saw a large drop with 62k less jobs than expected, and the Unemployment Rate rising to 4.3% from 4.1%. Last night the ISM Services PMI came in close to expectations at 51.4, showing growth from the previous 48.8. We've got a quiet week ahead for the USD in terms of economic data. Thursday’s Unemployment Claims may provide clarity as to whether recession fears are well founded.
 

EUR

The AUDEUR dropped the 0.60 handle over the weekend, falling over 3%, with some retrace on Monday to open this morning at a rate of 0.5945, being flat on yesterday's open. European equities finished in the red, with the DAX closing down 1.8% and CAC down 1.4%. Friday saw some low-level data being released, with the most notable being the Italian Industrial Production m/m, coming in unchanged 0.5%, expected to drop to 0%. Yesterday saw low tier PMI’s being released from the union, all coming in the expansionary territory. The large drop we saw was due to the poor Aussie dollar performance off the back of global recession fears. Looking forward, it is a quiet week ahead, with Retail Sales m/m coming out tonight, expected flat after a +0.1% increase last month.
 

GBP

The AUDGBP falls in line with over a 2% drop being seen on Monday, managing to break through the 0.50 barrier to hit a 4 year low of 0.4994 before retracing to this morning’s open of 0.5092. UK equities took a hit, with the FTSE closing down 2.0%. Final Services PMI came out mostly unchanged and as expected, with the BRC Retail Sales Monitor y/y coming in higher, as expected at 0.3% from -0.5%. Looking forward it is a very quiet week ahead, with tonight’s Construction PMI being the event of the week, expectations that it will remain unchanged at 52.5.
 

NZD

AUDNZD opens slightly higher at 1.0942 despite following the trend with the other major currencies, dropping to lows of 1.0850 in yesterday’s afternoon session. No figures out on Friday or over the weekend, however, yesterday ANZ Commodity Prices m/m fell -3.2% from last month (showing at -1.7%) as prices for New Zealand’s dairy, apples and aluminum retreated. Not too surprising as escalating tensions in the Middle East continue to make it harder to move products through the Suez Canal, weakening the exports of New Zealand. This week NZ will release their employment figures on Wednesday, as well as GDT Price Index.