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February 3rd - Todays interest rate hike was a difficult decision for the Reserve Bank of Australia (RBA), as it had just cut rates last August. The RBA had previously bucked the trend of other economies, deliberately keeping rates low for an extended period to prevent soaring unemployment. Now, it becomes the first major central bank to return to a rate-hiking path since the pandemic began. Some economists had predicted that the RBA might wait for more data, given recent slowing monthly inflation data and the strengthening Australian dollars potential to "cool" the economy. Domains chief economist, Nicola Powell, stated that while the rate hike would reduce borrowers ability to finance their homes, it would also weaken the upward momentum in the housing market. Assuming lenders fully pass on the cost of the rate hike, a borrower with a $600,000 loan would see their monthly payment increase by approximately $90. The focus now shifts to the tone set by Governor Bullock at the post-meeting press conference. Economists are currently uncertain whether the RBA will continue with rate hikes or if this is a one-off event.February 3 - The Reserve Bank of Australia raised interest rates by 25 basis points to 3.85%, in line with market expectations, after holding rates steady for three consecutive days.The Reserve Bank of Australia (RBA) set its interest rate at 3.85% on February 3, in line with expectations and down from 3.60% previously.On February 3rd, DBS Bank senior economist Radhika Rao stated in a report that the Indian market is poised for a rebound following the announcement of the US-India trade agreement. She noted that high tariffs were a major factor dragging down market sentiment over the past quarter, while the agreement is "undoubtedly a significant boon to the real economy and exports," and will also boost financial market sentiment. Rao added that textiles, gems and jewelry, engineered products, leather, and chemical products are expected to be the main beneficiaries. She wrote that considering the punitive tariffs previously imposed for purchasing Russian oil, the reduction from 50% to 18% effectively brings Indias tariff levels close to those of most Southeast Asian countries.According to sources, Republican leaders in the U.S. House of Representatives are planning to vote next week on a key bipartisan housing bill.

EUR/USD Expects Fourth Weekly Gains Above 1.0900 Despite The US Dollar's Rebound Advance Ahead Of US NFP

Daniel Rogers

Apr 07, 2023 11:42

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Despite a recent retreat, the EUR/USD bulls maintain control around 1.0920. This reflects the typical Good Friday inactivity and apprehension ahead of the US Nonfarm Payrolls (NFP) report released early in the day. The major currency pair was volatile on Thursday as a result of the US Dollar's initial rebound on fears of a recession, but ended the day unchanged as disappointing US data contrasted with stronger Eurozone data.

 

Fears of a recession in the world's largest economy were prompted by consecutive lackluster US data and falling US Treasury bond yields, giving USD bears a reprieve on Thursday morning. As traders prepared for the all-important NFP, the dollar's subsequent gains were reversed by another disappointing US employment report.

 

Despite this, US Initial Jobless Claims for the week ending March 31 rose to 228K from 200K anticipated and an upwardly revised 246K the prior week. Notable is the increase in Challenger Job Cuts from 77,77K to 89,703K in the given month.

 

Notably, Reuters fanned fears of a recession by citing the most recent decline in the preferred bond market indicator of Federal Reserve (Fed) Chairman Jerome Powell. The most reliable bond market indicator of an imminent economic contraction, according to Federal Reserve research, is the "near-term forward spread" between the forward rate on Treasury bills 18 months from now and the current yield on three-month Treasury bills.

 

According to Reuters, International Monetary Fund (IMF) Managing Director Kristalina Georgieva stated in prepared remarks on Thursday that the global economy is projected to expand by less than 3% in 2023, a decrease from 3.4% in 2022.

 

In other news, Germany's Industrial Production (IP) increased 0.6% year-over-year in February, versus market predictions of -2.7% and previous readings of -1.7%. Additionally, the monthly figures exceeded expectations by 0.1%, coming in at 2.0% compared to 3.7% previously. On Wednesday, Germany Factory Orders for February improved to -5.7% YoY from -12.0% previously revised down and -10.5% market expectations, while MoM growth came in at 4.8% compared to 0.3% expected and 0.5% previous readings.

 

Wall Street and US Treasury bond yields have both reduced weekly losses as a result of these strategies, but investors remain skeptical.

 

In the context of less liquidity surrounding the March US employment report, sporadic activity on the major markets can keep the EUR/USD inactive and prone to abrupt price swings. Notable is the fact that recent dovish Fed forecasts and disappointing US data generate expectations for a positive surprise and enormous price volatility thereafter.


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