RBA's Hawkish Tone Offsets Split Decision Concerns
AUD
The Aussie Dollar opens in the green across the majors off the back of yesterdays rate decision and Middle Eastern uncertainty in the background; with more movement expected due to upcoming global central banks meeting. Asian equities were mixed yesterday, the Shenzhen -0.7%, Nikkei -0.1% and the Hang Seng +0.1%. Locally the ASX 200 closed +0.4% as materials and real estate sectors led gains of +1% each. Yesterday the RBA delivered a cash rate hike of 25bps to 4.10% (Est. 4.10%), citing a material risk that inflation may remain above target for longer as short-term inflation expectations have already risen due to rising fuel prices. However, the 5-4 split decision initially weighed on the Australian Dollar, as investors interpreted it as a sign of uncertainty about future rate decisions. During her press conference, Michele Bullock emphasized that inflation was already high before the recent Oil price shock, due to domestic demand exceeding supply. This clarification was perceived as relatively hawkish and supports the rebound in the Aussie Dollar after the initial dip following the decision. This morning, CB Leading Index m/m came in at 0.2% and tomorrow will see Employment Change and Unemployment Rate data to release at 11:30AM with a quiet rest of the week for Asia ahead.
USD
AUDUSD opens in the green at 0.7105 jumping roughly 40 basis-points from yesterdays open, off the back of the RBA’s decision to hike interest rates 25 basis points. A steady session overnight saw slight gains on Wall St. with the Nasdaq trading +.4%, the S&P 500 +.3%, and the Dow Jones +.2% entering the final hour of trade. U.S. 10-year yields were slightly lower at 4.2, while Brent Crude was trading at $103 a barrel. This evening the US release their Core PPI m/m and PPI m/m data both expected to come in at 0.3% previously at 0.8% and 0.5% respectively. Tomorrow’s data dump sees the US Cash Rate, expected to hold at 3.75% and later Unemployment Claims expected at 215K and Philly Fed Manufacturing Index expected at 8.3, previously at 16.3. A quiet weekend data wise with all eyes on what’s next in the Middle East
EUR
AUDEUR has edged higher to 0.6159 this morning, gaining momentum following yesterday's RBA interest rate hike. European equities opened the session with a strong showing with the DAX and CAC closing at +0.7% and +0.5% respectively. Looking ahead to Friday, the ECB is widely expected to hold interest rates steady; however, with rising inflation threats fueled by regional conflict, interest rate futures are now fully pricing in a rate hike by the end of July.
GBP
AUDGBP opens this morning flat at 0.5318 amid ongoing uncertainty over the impact of the Middle East conflict on the global economy and inflation. The FTSE closed in the green at +0.8%. Nothing of note from the UK overnight as markets shift focus to the upcoming Bank of England rate decision on Thursday. Investors expect the BoE to leave interest rates unchanged at 3.75%, with a 7-2 majority, as conflicts in the Middle East have prompted inflation expectations in the United Kingdom
NZD
AUDNZD continues to gain ground, opening this morning at 1.2134 following the RBA decision to hike rates locally. A busy morning for New Zealand data wise with the GDT Price Index (Global Dairy Trade) coming in at 0.1%, which was 5.7% previously. Westpac Consumer Sentiment came in at 94.7, indicating pessimism about economic conditions and the Current Account for New Zealand came in at -5.98B (Exp. -4.78B). Tomorrow morning GDP q/q is set to release, currently forecasted at +0.5%.