RBA Delivers Hawkish Hold
AUD
The Aussie Dollar opens higher against the majors after the RBA left the Cash Rate unchanged at 4.35% yesterday (as widely expected), accompanied by surprisingly hawkish commentary. The RBA acknowledged that although disinflation has continued, they will remain vigilant to the upside risks of inflation, and that they are not ruling anything in or out with respect to future policy decisions. Given the ongoing concerns about elevated inflation, Governor Bullock aimed to send a very clear message about market interest rate expectations noting a very serious consideration to a rate hike at the meeting. She also said that pricing a rate cut in the next six months does not align with the Board's thinking, effectively and instantly pushing back against market bets for a 25bps cut in the near term. Commodities saw a dip however with Gold -0.1%, Silver -0.8%, Iron Ore -0.4%, and Copper being the only positive +0.3%. Asian Equities saw a recovery closing in the green with the ASX rebounding +0.4, Shanghai Comp +0.2%, and the Nikkei +10.2%. Early this morning we will hear from RBA Assist Gov Hunter speaking on the cost of living, which will unlikely cause any movement in markets, however, later today, we may also receive some data out of China as it is set as tentative with their Trade Balance which is forecast to decrease from 704B to 693B, and their USD-Denominated Trade Balance forecast to decrease from 99.1B to 97.5B.
USD
The AUDUSD coupling opens this morning slightly higher at 0.6521 as the AUD steadied after the RBA pushed back on rate cut calls and risk sentiment improved slightly. The US Trade Balance last night also came through lower than forecasted at -73.1B from -72.5m while RCM/TIPP Economic Optimism underperformed coming in at 44.5 from the forecast 45.0. US equities rebounded slightly closing in the green with the Dow Jones +0.8%, while the S&P 500 and Dow Jones were both +1.0%. Looking at the news overnight the US will release their Crude Oil Inventories expected to increase from -3.4M to -1.6M, we will also see their 10-y Bond Auction results, however, the main event will be their Unemployment Claims set for release at 10:30pm tomorrow night.
EUR
The AUDEUR opens higher this morning at 0.5965, rebounding off of the RBA’S hawkish commentary and underperforming Eurozone Retail Sales which came through at -0.3% from the forecasted 0.0%. Eurozone equities closed mixed with the DAX +0.1%, and the CAC -0.3%. No major data set for release today with German Industrial Production m/m, German Trade Balance, and French Trade Balance set for release later this afternoon.
GBP
The AUDGBP coupling regained its 0.51 handle, opening higher this morning at 0.5132, riding the RBA’s hawkish commentary yesterday. UK equities closed in the green with the FTSE up 0.2%. Relatively quiet day on the news from out of the UK with only the Halifax HPI m/m set for release later this afternoon forecast to increase from -0.2% to 0.2%.
NZD
The AUDNZD coupling took a hit this morning opening lower at 1.0915 after New Zealand’s Employment Change q/q came through higher than expected at 0.4% from forecast -0.2%, and their Unemployment Rate dropped from 4.7% to 4.6%. Their Labor Cost Index q/q also saw a slight boost from 0.8% to 0.9%. The figures represent surprising strength in the Kiwi labour market, thereby strengthening the NZD in the aftermath. No further news set for today however tomorrow we will see their Inflation Expectations q/q set for release at 1pm.