- RBA holds the Cash Rate at 0.10%, as expected. Ends QE
- Australian December retail sales -4.4% vs +3.9% expected
- Japan unemployment rate 2.7% vs 2.8% expected
- Australia January final Markit PMI 55.1 vs 55.3 prelim
- Australia AiG December manufacturing index 48.4 vs 54.8 prior
- Japan January Jibun bank manufacturing PMI 55.4 vs 54.6 expected
- Australia December home loans +5.3% vs +7.6% prior
- Boris Johnson to travel to Ukraine tomorrow
- New Zealand December trade balance -$477m vs -$864m prior
- US: We only have 'a handful of weeks' left to get Iran nuclear deal
Markets:
- WTI crude up 31-cents to $88.46
- US 10-year yields down 1.1 bps
- Gold up $2 to $1798
- S&P 500 futures down 14 points
- NZD leads, AUD lags
China, South Korea and other parts of Asia were off for Lunar New Year holidays but Japan and Australia certainly picked up the slack.
The main event was the RBA decision. With other global central banks leaning to the hawkish side, the RBA was expected to do the same. They didn't. While they ended QE (as expected), they pushed back against rising inflation arguing that wage dynamics in Australia are different and essentially took a transitory approach to the current high prices.
AUD/USD fell 30 pips to 0.7040 but steadied soon afterwards and battled back up to 0.7062. It's a sign that the market isn't overly concerned with precisely when a central bank hikes. After all, if inflation does prove to be transitory in Australia, that will be the case elsewhere as well and many of the hikes priced in throughout global currencies will have to come back out.
At the same time, there have been some wild moves in risk trades lately and that's more where the market is focused. US stocks finished strongly on Monday but the positive tone has been tempered so far today with futures lower and the yen strengthening.
A bit of unique US dollar weakness is also creeping in, perhaps in a nod to modestly lower yields so far. It's also the first day of the new trading month so signals will be tough to glean.
Other data painted a mixed picture. Australian retail sales where ghastly as omicron took a much bigger bite than economists expected. At the same time, home financing data showed that last year's 21% rise in home prices might not yet be done.
In Japan the manufacturing PMI hit a 14 year and and includes signs of inflationary pressures. Japan's top currency diplomat also had some comments that suggested the neverending preference for a weaker yen may no longer be assumed.
