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GBP

06 Jun 2023

RBA: hiking until it hurts

In what we think was a finely balance decision, at least in terms of the timing not the direction, the RBA raised the cash rate by another 25bps to 4.1% at today’s meeting. This takes the cumulative tightening delivered since things started in May 2022 to 400bps, by far the most abrupt RBA rate hiking cycle since at least the early 1980s. The RBA reiterated that while inflation has passed its peak, at ~7%pa it “is still too high and it will be some time yet before it is back in the target range”. And in the RBA’s assessment, “recent...

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05 Jun 2023

RBA in focus

• Softer US data. The dip in the services ISM exerted some downward pressure on US bond yields & the USD late in US trading.• RBA in focus. Will they or won’t they hike today? We think it is a line ball call. Most analysts & the rates market are leaning towards no change.• AUD reaction. Given expectations, AUD reaction could be uneven, with a hike likely to generate a relatively larger lift compared to the pull-back on an on hold decision. US markets consolidated overnight, with equities easing slightly (S&P500 -0.2%) and bond yields a bit lower. After rising...

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05 Jun 2023

Firming Rate Expectations Push Dollar Higher

With investors increasingly convinced the Federal Reserve will follow through on its “higher for longer” mantra – at least through the latter half of the year – the dollar is kicking another week with solid gains. Firming expectations for a July hike – coupled with a removal of bets on late-year cuts – are tilting rate differentials in the greenback’s favour, with the two-year Treasury yield holding near 4.54 percent, up from 4.06percent at the end of April. The pound, euro, and yen are all on the defensive, failing to break higher as relative growth expectations erode.  Friday’s non-farm payrolls report provided...

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05 Jun 2023

A matter of when, not if the RBA moves again

• US labour market. Another punchy US payrolls report. US yields rose, as did the USD. Broader risk sentiment remains positive.• Limited offshore data. Global event calendar is limited this week. Over the weekend Saudi Arabia announced a cut to its oil production.• RBA in focus. Will the RBA deliver another hike this week? Markets factoring in a ~40% chance. Given pricing, there could be an asymmetric AUD reaction. Risk sentiment remained positive at the end of last week. Equities added to recent gains with the US S&P500 rising by another ~1.5%. The S&P500 is now at its highest level...

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31 May 2023

Global growth concerns

• Growth worries. Weaker than expected China PMIs added to global growth concerns. This has dampened risk sentiment. AUD touched a new ~6-month low.• AU CPI. Inflation indicator re-accelerated more than expected. Data bolsters the case for another RBA hike. Tomorrow’s minimum/award wage decision is important.• USD firm. The USD remains near its recent highs. US ISM manufacturing survey released tonight, with non-farm payrolls due on Friday. Another negative night for risk sentiment with more signs the world economic downturn is gathering pace coming through. Across equities, the EuroStoxx50 fell 1.7% and the US S&P500 was down 0.6%. This followed...

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