IG SHOULD TELL US HOW TO RECREATE THE TWITTER STREAM
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10/06/21 10:53
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Escalating inflation and burgeoning wages prime the stage for a probable 25bp rate increase from the Reserve Bank of Australia in the upcoming meeting. Source: Bloomberg Inflation Wage Consumer price index Reserve Bank of Australia Interest rates Australia Tony Sycamore | Market Analyst, Australia | Publication date: Friday 02 June 2023 The Reserve Bank Board of Australia is scheduled to meet on Tuesday, the 6th of June, at 2.30 pm in what is expected to be another line ball decision. Last month, the RBA sent ripples through the market, lifting the cash rate by 25bp to 3.85%. Marking the RBA’s eleventh rate increase in a cycle starting last May, it amounted to a cumulative 375bp hike. With inflation having likely peaked, the RBA concluded it remained too high, warranting an additional hike to realign inflation with the target. Governor Lowe's standpoint In a recent statement, Philip Lowe, Governor of the Reserve Bank of Australia, underscored the significance of ushering inflation back on target in a sensible timeframe, hence justifying the Board's decision to implement another uptick in interest rates. "The importance of returning inflation to target within a reasonable timeframe underscored the board's judgement that a further increase in interest rates was warranted." Maintaining its tightening stance, the RBA indicated its willingness to instigate additional rate hikes, contingent on the economy and inflation's trajectory. Lowe emphasised the Board's vigilance over global economic developments, trends in household spending, and inflation and labour market forecasts. "Continued attention will be paid to developments in the global economy, trends in household spending and the outlook for inflation and the labour market." RBA cash rate chart Source: RBA Market forecasts and the RBA's decisions In the wake of the RBA’s May Board meeting, wages, employment, and retail sales data have come out softer than expected. Bucking the trend of milder data, the Monthly CPI indicator exceeded expectations at 6.8% (vs 6.4% exp). The core measure of inflation, the trimmed mean, lifted from 6.5% to 6.7%. As the monthly CPI indicator is relatively new and this month excluded around 35% of the items in the basket (35% of the basket is surveyed in the second or third month of the quarter), its credibility is less than quarterly inflation numbers. Nonetheless, the re-acceleration in the Monthly CPI indicator will not sit well with an RBA looking for firm signs that inflation is cooling after its record-breaking run of rate hikes. Also, likely to be figuring in the RBA’s considerations, the Fair Work Commission handed down its Annual Wage Review for 2022-2023 this morning. The decision to increase award and minimum wages by 5.7% exceeded market expectations of 5%, came below the 7% the ACTU claimed, and surpassed the 3.5% employers sought. The RBA's predicament and likely decision The RBA has highlighted its focus on wage growth and subdued productivity in recent communiques. “Unit labour costs are also rising briskly, with productivity growth remaining subdued.” Cognizant of the RBA’s predicament of cooling inflation while keeping the economy on an “even keel”, the Australian interest rate market is pricing a ~25% chance of an RBA rate hike next week. However, due to the hotter than expected Monthly CPI indicator and the higher-than-expected rise in the award and minimum wages at the Annual Wage Review, we think the RBA will elect to raise rates by 25bp to 4.10% when it meets on Tuesday. Source: ASX Summary The Board of the Reserve Bank of Australia has a meeting on the calendar for Tuesday, June 6th, at 2:30 pm. In a decision that's likely to be finely balanced, we anticipate the RBA will opt for a 25bp hike, pushing rates to 4.10% -
WTI recoups recent losses while gold, silver on track for first weekly advance Outlook on WTI, gold and silver as US debt ceiling bill is signed off and US dollar plummets. Source: Bloomberg Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023 WTI recoups some of this week’s losses ahead of OPEC+ meeting WTI, which dropped by over 7% this week amid US debt ceiling negotiations and as data out of China showed a mixed picture, is regaining some of its lost ground as a US default has been averted and as OPEC+ meets this weekend. Despite WTI rallying back to last Thursday’s low at $71.02, it is expected to end the week in negative territory. Potential upside targets for next week can be seen along the April-to-June downtrend line at $72.68 and at the mid-May high at $73.30. Minor support comes in at Wednesday’s $69.73 high and more significant support at the late May $67.12 low. Source: ProRealTime Gold recovery off six-month uptrend line has further to run The price of gold is on track for its first weekly positive close in a month and is trying to reach the 55-day simple moving average (SMA) and April support line, now because of inverse polarity resistance line, at $1,991 to $1,994 per troy ounce. As risk-on sentiment is back in play due to the US debt ceiling bill having been passed by both US Houses, the gold price may soon lose upside momentum. If so, the mid-April low at $1,970 is likely to be revisited. Below it lies the mid-May low at $1,952. Source: ProRealTime Silver set for first weekly advance in a month The silver price is set to see its first weekly advance, following three consecutive weeks of lower prices, in bouncing off its two-month low at $22.68 per troy ounce. The Caixin manufacturing index out on Thursday pointed to expansion in the Chinese manufacturing sector, opposite to official figures released on Wednesday, and helped the price of silver to rise. The 19 May high at $24.01 is now within reach, a rise above which would eye the 55-day SMA at $24.30. Further up the late April low can be spotted at $24.50. Minor support can be found at the 18 May trough at $23.33. Source: ProRealTime
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Indices rally as US agrees debt ceiling bill Outlook on FTSE 100, DAX 40 and S&P 500 as US government agrees to raise the country’s debt ceiling. Source: Bloomberg Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Friday 02 June 2023 FTSE 100 recovers as US avoids a default The FTSE 100 is seen bouncing off its two-month low at 4,433 on the back of rallying Asian markets as the US Senate passed the debt ceiling deal which now only needs to be signed into law by President Biden. The index thus retests its 200-day simple moving average (SMA) at 7,532, a rise above which would engage last week’s low at 7,556 and also the 7,587 22 March high. For the bulls to be back in control, last week’s high at 7,660 would need to be overcome on a daily chart closing basis. Key short-term support sits at this week’s low at 7,433, a currently unexpected drop through which would target the early January low at 7,412. Below it the December and 24 March lows can be spotted at 7,331 to 7,296. Source: ProRealTime DAX 40 rallies on positive news out of the US The DAX 40 revisited its 55-day SMA at 15,748 as US ADP employment data came in much stronger-than-expected but then bounced off it as the Senate agreed to the debt ceiling deal. The German stock index is seen breaking through its May-to-June uptrend line at 15,940. It thus targets the early May high at 16,009, followed by last week’s high at 16,080. This level would need to be exceeded for the bulls to be back in the frame. Support below Friday’s 15,880 intraday low sits at the 15,723 late May low. Source: ProRealTime S&P 500 rallies as US debt ceiling deal is signed off The S&P 500 rallies back to this week’s high at 4,234 as a US debt ceiling deal has been reached. Above this level lies the August 2022 peak at 4,325. Slips should find support between the 4,187 early May high and the 10 May high at 4,158. Within this area lies this week’s low at 4,167. Source: ProRealTime
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