RBA

An upside surprise on ISM services helped slow the bleeding on US stock markets and AUD/USD erase heavy losses ahead of todays RBA meeting. Nikkei futures rose 6% after its 12% plunge, which brings hopes for a bounce on the ASX 200 today.

Two RBA speeches and a monetary policy decision along with updated RBA forecasts are the highlights of the week for AUD/USD traders on the domestic front. Although risk-off tones and an ISM services report could prove to be the bigger drivers.

It has been another volatile week for traders thanks to weaker US economic data, a dovish Fed and a refreshingly hawkish Bank of Japan. ISM services is a key event from the US next week, but apart from that it is mainly second-tier data from the APAC region. And that means appetite for risk might be the main driver for markets next week. But given the larger moves already seen, we may need to lower out expectations for volatility unless a fresh catalyst arrives.

AUD/USD is benefitting from speculation about another interest rate hike from the RBA after a higher-than-expected CPI report and strong retail sales figure - see the key levels to watch from here!

Concerns that headline employment figures could be lagging a worse picture alongside a lack of updated service inflation figures prompted the RBA to hold rates in June. And that makes the quarterly CPI report in a few weeks all the more important.

There is now little doubt underlying inflationary pressures in Australia are accelerating again, increasing the risk the Reserve Bank of Australia (RBA) will be forced to hike interest rates again for the first time since November. AUD/USD, Australian bond yields surge while ASX 200 tanks.

A relatively hawkish meeting from the RBA has supported AUD over the past 24 hours, sent AUD/JPY to an 11-year high and made next week's inflation report the more important.

The RBA has evidence to justify continued vigilance towards continued upside inflation surprises, vowing it will do what it is necessary to bring it back to the 2.5% midpoint of its inflation target. But it’s not yet compelling enough to warrant hiking rates, choosing to retain a neutral bias in June.

It is a monster week ahead for traders with a key focus on central banks, with BOJ, Fed, BOE and RBA meetings on the menu.

AUD/USD could be susceptible to movement from minutes of the recent FOMC and RBA meetings. But with Australian unemployment data hitting a three-year high, a softer set of wage figures could bring forward bets of a rate cut.

The RBA continues to see the risk that rates may increase again despite delivering updated forecasts showing faster progress in bringing inflation back to within its target band. For AUD/USD traders, there was more interest in the rally in Chinese stocks and currency than what the bank had to say.

Bargain hunting by cost conscious consumers saw Australian retail sales volumes accelerate slightly in the final three months of 2023, reducing the risk of a negative growth when the December quarter national accounts are released in early March.

An inflationary ISM report saw bets of multiple Fed cuts reduced to send the US dollar index to an 11-week high. If the RBA come out with a dovish meeting today, AUD/USD could be headed for 64c.

EUR/AUD is on track to record its fifth consecutive daily gain to start the trading week, moving the pair to within touching distance of the downtrend bulls have been thwarted at on several separate occasions dating back to the middle of last year.

Monday could be off to a volatile start if Jerome Powell’s 60-minutes interview causes a stir for global markets. Whilst the RBA meeting, press conference and updated forecasts could drive sentiment for AUD and the ASX next week

AUD/USD suffered its worst month in 11 in January, after traders scaled back bets of several Fed cuts this year which helped the US dollar rally and force AUD/USD -3.5% lower for the month. The focus now shifts to next week's RBA meeting.

There’s a growing risk the RBA may end up cutting interest rates sooner than US Federal Reserve with a slowdown in underlying inflationary pressures in the December quarter seeing markets shift forward expectation for a 25 basis point rate cut to early May.