The strongest to the weakest of the major currencies
The AUD is the strongest and the EUR is the weakest as the North American session begins. The USD is mixed with gains versus the EUR, GBP and CHF and declines vs the CAD, AUD and NZD.
The Reserve Bank of Australia surprised the market with a 25 basis point hike to 4.10%. In the statement by Phillip Lowe of the RBA, he said:
High inflation makes life difficult for people and damages the functioning of the economy. It erodes the value of savings, hurts family budgets, makes it harder for businesses to plan and invest, and worsens income inequality. And if high inflation were to become entrenched in people’s expectations, it would be very costly to reduce later, involving even higher interest rates and a larger rise in unemployment.
Lowe added that:
- Inflation in Australia, at 7%, has passed its peak but is still too high.
- The rate increase is intended to facilitate a return of inflation to the target range within a reasonable timeframe.
- Growth in the Australian economy has slowed and labour market conditions have eased, although they remain very tight.
- Unemployment increased slightly to 3.7% in April and employment growth has moderated.
- Wages growth has increased due to the tight labour market and high inflation.
- The RBA remains alert to the risk of ongoing high inflation contributing to larger increases in prices and wages.
- The Board aims to keep the economy balanced as inflation returns to the 2–3% target range, but acknowledges that this is a challenging path.
- There is significant uncertainty around the outlook for household consumption due to higher interest rates and cost-of-living pressures.
Lowe concluded that, further tightening of monetary policy may be required, depending on the evolution of the economy and inflation and that the RBA remains committed to their fight to return inflation to the target range.
The AUDUSD has moved up by 0.70% in trading today. Looking at the hourly chart, it moved above the double top at the 50% of the May trading range at 0.66375 and approached the 200 day MA at 0.66923 where sellers have leaned on the first look/test. The high price reached 0.9985 – 7 pips short of that key MA target.
AUDUSD runs higher toward 200 day MA after RBA rate hike
In the premarket for US stocks, the futures are implying a mixed opening following a decrease in the main indices on Monday. This dip in the market partly reverses the rally seen last week. The fluctuation in Apple’s share price following the Vision Pro introduction yesterday at the Apple WWDC23. The Vision Pro, a new mixed reality headset, is being touted as the most sophisticated personal electronic device to date. However, despite the ambitious launch, Apple’s shares experienced a minor dip, possibly due to concerns about the hefty price tag of $3,499 and broader challenges around AR/VR technology adoption by consumers. Apple shares are trading at $178.75 after closing at $179.58 yesterday and trading to a new all-time high (at $184.93).
European issues are marginally lower in premarket trading today. Japan’s Nikkei closed at a another record high (3rd consecutive record close)
US yields are modestly lower across the board. The Fed is in the quiet period ahead of their interest rate decision next Wednesday. The market is debating whether it’s 25 basis points or no change. The Fed will get one more CPI release next Tuesday ahead of their decision (on Wednesday).
Oil prices are trading lower due to concerns over the U.S. economy’s outlook and the sluggish start to the China post-Covid recovery. Both concerns are overshadowing the impact of Saudi Arabia’s pledge to cut production. Over the weekend, Saudi Arabia vowed to unilaterally cut production by approximately one-tenth or 1 million barrels per day. The decline in oil prices is a setback for Saudi Arabia, who is looking to increase prices toward $80 a barrel. The current price is trading near $70.50
A snapshot of the market currently shows:
- Crude oil is down -$1.59 at $70.57
- Spot gold is trading up $2.80 at $1963.99
- Silver is up $0.18 at $23.70
- Bitcoin is little changed at $25,698 a day after the SEC sued Binance and their founder Zhao. The price traded as low as $25,389 yesterday. The SEC has just announced that they are suing Coinbase in the State of New York claiming that the company is operating as a unregistered broker. Coinbase shares are trading down -16.57% at $48.94 after the news.
In the premarket for US stocks, the major indices are mixed:
- Dow Industrial Average is trading down -12 points after yesterday’s -199.90 point decline
- S&P index is trading near unchanged after yesterday’s -8.60 point decline
- NASDAQ index is trading up 10 points after yesterday’s -11.34 point decline
in the European equity markets, the major indices are trading lower:
- German DAX unchanged
- Frances CAC -0.17%
- UK’s FTSE 100 -0.15%
- Spain’s Ibex -0.27%
- Italy’s FTSE MIB -0.37%
in the Asian Pacific market today:
- Japan’s Nikkei rose 0.90% to a new all-time high
- Hang Seng index fell -0.05%
- Shanghai composite index-1.15%
- Australia’s S&P/ASX 200 index-1.20%
in the US debt market yields are marginally lower:
- 2 year yield 4.470% -1.1 basis points
- 5 year yield 3.812% -1.6 basis points
- 10 year yield 3.677% -1.6 basis points
- 30 year yield 3.878% -1.3 basis points
in the European debt market, benchmark 10 year yields are lower
European 10 year yields