The USD is the strongest and the AUD is the weakest as the NA session begins.
Overnight, the RBA raised rates by 25 bps as expected but it was a more dovish hike. The RBA statement said:
- "The Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.
- In assessing when and how much further interest rates need to increase, the Board will be paying close attention to developments”
In doing so the RBA is now flagging that they expect at least one more hike and after that to be data-dependent. A very pertinent detail in the Statement for the shift is this:
- “recent data suggest a lower risk of a cycle in which prices and wages chase one another”
The comments have seen the AUDUSD move to new lows for the year (below 0.66944), and with the pair making a run to - and marginally through the next key target at the 50% of the move up from the October 2022 low. That level comes in at 0.6663. The low just reached 0.6659 so far (and trades at 0.6661 currently). The pair is sitting on the edge of the important midpoint level and having "a think" about going below and targeting the December low at 0.66284 next.
BOE Mann said that "I think more needs to be done with rates" adding:
- Concerned about persistence of core inflation
- Weak pound is significant for inflation
Despite the hawkish rhetoric, the GBPUSD will back below its 200 are moving average of 1.20128, its 100 are moving at 1.2003 and its 100 day moving average of 1.19899. However, the price is rebounding off of a low price of 1.19752, and trades back near 1.2000 at 1.1996 currently.
Today, Fed's Powell will testify on Capitol Hill at 10 AM ET. The text of his testimony may come out earlier (8:30 AM ET). So be aware.
Wholesale inventory in the US will be released at 10 AM ET with expectations of -0.4% versus +0.1%.
The U.S. Treasury will auction off three-year notes at 1 PM ET.
The terminal rate seen by the market is now up to 5.5%. The Fed in their December dot plot, forecasted a terminal rate of 5.11% (implying a targeted high range of 5.0% – 5.25%). The next Fed decision will be on Wednesday, March 22 where the Fed is still expected to raise rates by 25 basis points.
The US employment report will be released on Friday and the US CPI report will be released next Tuesday. Both will be instrumental in what happens on March 22. Nonfarm payroll is expected to see a gain of 224K versus an oversized 517K last month.
Despite the rise in the US dollar, US yields are lower ahead of the chairman's testimony today. US stocks are higher after a mixed result yesterday. Crude oil prices are back below the $80 level after testing $81 at the highest level earlier today.
A snapshot the markets currently shows
- Spot gold is trading down $-6.80 or -0.37% at $1839.35.
- Spot silver is down $0.14 or -0.67% at $20.89
- WTI crude oil is trading at $79.98 down $0.48 on the day. The high price reached $80.94 today before backing off. The low for the day has reached $79.82
- The price bitcoin is trading steady at $22,378. High price reached $22,547. The low price extended to $22,332. At 5 PM yesterday the price is trading little change from current levels at $22,367
In the premarket for US stocks, the major indices are trading marginally higher after yesterday's fixed close. The S&P is on a three day winning streak:
- Dow Industrial Average after yesterday's 40.47 point rise
- S&P is up 3.75 points after yesterday's 2.78 point rise
- NASDAQ index is up 30 points after yesterday's -13.27 point fall
The European equity markets are mixed/modestly changed. The German DAX extended to a new cycle high at 15706.37 (and the highest level since February 2022). The index currently trades at 15665.59. France's CAC traded near its all-time high level. Yesterday the intraday high price reached 7401.15 (new all-time high price). Today the high could only reach 7398.03.
- German DAX, +0.07%
- France's CAC, +0.05%
- UK's FTSE 100, +0.33%
- Spain's Ibex -0.13%
in the Asia-Pacific equity markets:
- Japan's Nikkei rose at 0.25%
- China's Hang Seng index-0.33%
- Shanghai composite index tumbled -1.11%
- Australia's S&P/ASX index rose 0.49%
In the US debt market, yields are lower:
- 2 year yield 4.871%, -2.2 basis points
- 5 year yield 4.238% -3.0 basis points
- 10 year yield 3.949% -4.3 basis points
- 30 year yield 3.875% -3.6 basis points
In the European debt market, the benchmark 10 year yields are also trending to the downside:
