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USD

01 Aug 2023

RBA holds firm

In what we think was another ‘finely balanced’ decision the RBA held the cash rate steady at 4.1% for the second straight month at today’s meeting. As stressed by the RBA interest rates have increased by 400bps since May last year. The tightening in policy is “working to establish a more sustainable balance between supply and demand in the economy”, and the decision to hold firm once again “will provide further time to assess” the impacts of past moves. As our chart shows, this has been the most aggressive policy tightening in several decades with the upswing in interest rates...

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31 Jul 2023

Another ‘line-ball’ RBA call

• Mixed signals. Equities & bonds consolidate. Commodities firmer. In FX, the JPY has weakened, while the AUD has outperformed.• AUD rebound. More reports out of China pointing to growth-supportive measures coming through have boosted the AUD in the lead up to today’s RBA decision.• Hike or hold? There are arguments for & against a move. Markets & analysts are split. Given pricing a hike could see the AUD spike higher, but it may not last. It was a quiet end to the month for most markets. US equities edged higher (S&P500 +0.2%), bond yields consolidated (US 2yr and 10yr...

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30 Jul 2023

Will the RBA hike or hold this week?

• Positive sentiment. Softer US price & wage data supported risk appetite. Equities & commodities firmer, US yields lower. FX was more mixed.• BoJ tweak. BoJ adjusted its yield curve control framework. Based on further steps & improvement in other fundamentals we see the JPY strengthening over time.• RBA in focus. Will they hike or hold? Analyst community is leaning towards a move. Markets are less convinced. A change would generate a knee-jerk AUD lift. Risk sentiment ended last week on firmer footing, although FX markets moved a bit more to the beat of their own drum. US equities rose...

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28 Jul 2023

Strong consumer demand and softening inflation bolster US “soft landing” hopes

With American households honouring their time-honoured role in acting as global consumers-of-last-resort and inflation pressures continuing to subside, financial markets are seeing a broad-based rise in risk-taking activity this morning. Equity futures are pointing to a strong open, the dollar is ticking lower, and high-beta currencies are outperforming after a raft of softer inflation data added to yesterday’s strong second-quarter growth print in suggesting that the US economy is shrugging off the impact of higher rates – and could continue to power global growth in the months to come. The yen is up modestly and global yields are higher after the...

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28 Jul 2023

BoJ Loosens Its Grip

The tide looks to be (finally) turning when it comes to the Bank of Japan’s ultra-accommodative policy stance, albeit slowly. At today’s meeting, while the BoJ maintained its policy rate at -0.1% and its 10-year bond yield target at “about 0%”, its yield curve control framework was adjusted. Rather than having a rigid +/- 0.5% band around its 10-year bond yield target, things will now be controlled “flexibly”. Importantly, the BoJ also announced that it will offer to purchase 10-year Japanese government bonds at 1% each business day. In our mind this provides a guide to the BoJ’s new upper...

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