Market Watch AU – 6th February 2024
The US-dollar continued to surge to an eleven week high as traders wound back their expectations for a Fed rate cut any time soon. The US ISM Services Index showed new orders had increased over January and added to the positive sentiment from the US Jobs report last Friday, pushing US Treasuries and US dollar into favour. A Fed funds cut by March this year has diminished to a mere 14.5% chance. Fundamentally, the repricing of the Fed policy implies a higher US-dollar and Treasury yields and thus adding pressure to the G10 currencies. The RBA rate decision and statement today, may give the Aussie some temporary lift, though no change is widely expected, leaving the AUDUSD pair to continue its broader downtrend. China’s property sector woes and equity rout continue to reflect the markets lack of confidence in their economic outlook, just adding to the considerations for Aussie. So downunder today, we remain attentive to the RBA Meeting announcements, as traders continue to look for support levels on the AUDUSD after a deterioration through 0.65-cents, with preference to sell the fade to 0.6530’s now favoured. Of note also, is that the RBA has changed the number of board meetings for 2024, from 11 to just 8, with officials looking to have more time to assess economic developments between meetings.
Wall Street stocks slipped lower for the opening session of the week, succumbing to the pressure of rising Treasury yields after US Fed chief, Jerome Powell, doused market speculation that interest rate cuts were imminent. By mid afternoon, the DJI was down -0.6% for the session, while the S&P500 lower by -0.2%, and the Nasdaq also down -0.2% during the session. Australian shares are looking to trade further lower today, weighed down by commodities and as investors turn to the RBA meeting and their outlook on interest rate directions.
Gold prices are further lower as US Treasury yields continue to firm and the US-dollar gaining with them, seeing investors pushing back the prospect of Fed rate cuts soon, on the back of the better than expected US employment numbers last Friday.
Copper prices fell on the LME as the US-dollar rallied, while concerns over global industrial activity and China demand continues to weigh down the outlook. Dalian Iron ore futures traded further lower, as traders continue to weigh up China demand as they tackle their property sector woes and portside inventories rise.
Brent Crude prices posted daily gains, with supply concerns re-emerging due to the tensions around the Middle East and those between Russia and Ukraine.
Open today 0.6483
Yesterday’s Range 0.6469 / 0.6524
Open today 0.6055
Yesterday’s Range 0.6038 / 0.6082
Yesterday’s Range 1.0706 / 1.0756
Yesterday’s Range 0.6023 / 0.6051
Yesterday’s Range 4.6728 / 4.7028
Yesterday’s Range 0.5145 / 0.5175
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