RBA Warns on Rate Hike, Inflation

At its policy meeting which began today, the Reserve Bank of Australia left rates unchanged at 4.35%, warned there may be another hike, and said inflation remains high, strengthening the Aussie.

1. The Australian Dollar is stronger this morning after the RBA’s statement warned about the prospect of another rate hike, when markets had until recently been hoping for a cut. The RBA also warned that inflation remains high, after deciding to leave rates unchanged at 4.35%. This more hawkish tilt from the RBA has put a bid into the Australian Dollar today, which has got stronger against every other currency.
2. The RBA’s hawkish tilt has been mirrored lately by the US Federal Reserve, and this has been reflected in the continuing rise of US treasury yields, which had been trending down until recently.
3. US stock markets remain very bullish despite the more hawkish central bank rhetoric, with major US equity indices such as the S&P 500 and the NASDAQ 100 showing bullish price action close to all-time highs.
4. In the Forex market, the Australian Dollar has been the strongest major currency since the Tokyo open today. The US Dollar has been the weakest, putting the AUD/USD currency pair in focus. The greatest volatility recently has been seen in the USD/JPY currency pair.
5. The EUR/USD currency pair may have made a double bottom at $1.0725.
6. Cocoa futures rose very strongly yesterday to reach a new multi-year high price, which will keep trend traders interested in this commodity on the long side. It has been exhibiting a powerful bullish trend for well over one year.
7. Yesterday’s release of US ISM Services PMI data came in a little stronger than expected, pointing to the recent theme of continuing strength in the US economy.
8. There will be a release today of New Zealand Unemployment data, and the Governor of the Bank of Canada will be giving a minor speech.