- AUD/USD marked a little lower, less hawkish Reserve Bank of Australia Gov. Lowe Statement
- RBA announce a +25bp cash rate hike to 3.6%. As expected.
- Two-thirds of China's local governments in danger of breaching unofficial debt thresholds
- China - Whatever currency used in China-Russia trade should be safe, trustworthy
- Chinese Foreign Minister Qin Gang says will oppose cold war mentality
- Bank of America CEO says he expects interest rates to begin dropping this time next year
- PBOC sets USD/ CNY central rate at 6.9156 (vs. estimate at 6.9159)
- JP Morgan (Kolanovic) repeats projection for risk assets bear market
- Australian January trade data: Exports +1% m/m (prior-1%) & Imports +5% m/m (prior +1%)
- UK data - BRC measure of total sales (February) +5.2% y/y (from +4.2% prior)
- Japan wages data for January: Real wages post their biggest fall since May 2014
- U.S. energy envoy Hochstein says Russian oil price caps are working well
- Canada's PM Trudeau will appoint a special rapporteur to investigate foreign interference
- Hokkaido region Japan earthquake, magnitude 5.0
- Australia weekly consumer confidence 79.9 (prior 80.0)
- RBNZ Governor Orr to speak at an online private event - heads up
- ANZ are mildly bullish AUD & NZD vs. USD for the next couple of weeks, watching RBA today
- ICYMI - Nomura ramped their ECB peak rate forecast to 4.25% from 3.5% previously
- Trade ideas thread - Tuesday, 7 March 2023
- Major US stock indices close mixed on the day
- Forexlive Americas FX news wrap: Euro touches a two-week high
The Reserve Bank of Australia raised its cash rate by 25 bp today, taking the rate to 3.6% in an ‘as expected’ decision. Most of the interest though fell on the Statement accompanying the decision. In it Reserve Bank of Australia Governor Lowe softened the language he used, shifting to less hawkish than in the February Statement. Specifically this (from February):
- "The Board expects that further increases in interest rates will be needed over the months ahead"
morphed into this:
- "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”
Lowe did add a caveat, which is reasonable:
- “The Board, however, remains alert to the risk of a prices-wages spiral, given the limited spare capacity in the economy and the historically low rate of unemployment. Accordingly, it will continue to pay close attention to both the evolution of labour costs and the price-setting behaviour of firms.”
AUD/USD had popped a little higher in the hours leading up to the RBA announcement, but the USD was a touch weaker pretty much across the majors board at the time so this pop was non-AUD specific. After the announcement though AUD/USD was marked down. As I post its bouncing back just a little.
On the data agenda today we had Japanese wages data for January. The abysmal headline from this was that real wages (that is, wages after inflation) posted their biggest fall since May 2014. The Bank of Japan is encouraging higher wages to support inflation. There wasn’t much joy for them in this data. USD/JPY got a bit of a lift on an ebbing of the prospect of any shift for BOJ policy (at the margin). It was small and short-lived though, as I post USD/JPY is net very little changed on the session.
Asian equity markets:
Japan’s Nikkei 225 +0.36%
China’s Shanghai Composite +0.16%
Hong Kong’s Hang Seng +0.93%
South Korea’s KOSPI +0.37%
Australia ASX 200 +0.5%
