The FP Markets Research Team produces First Light News during the early hours of the European session, a daily Market Briefing that helps ensure traders and investors are up to date in the macro space for the day ahead.

Good morning.

Overnight observed the Reserve Bank of Australia (RBA) kept its Cash Rate Target unchanged at 4.35% (12-year peak) for the last policy meeting this year, as widely expected, and maintained their data-dependent outlook. This allows the RBA time to assess the economic picture before it meets again in early February. Interestingly, the Cash Rate Target has increased by 425bps since the RBA began policy firming in May 2022.

Today’s no-change follows inflationary pressures cooling to 4.9% in the twelve months to October, according to the monthly CPI indicator, and the Aussie unemployment rate rising to 3.7%. However, although the monthly CPI indicator suggests slowing inflation, the Board noted that the update lacks information on services inflation.

The post-rate statement echoed November’s widely talked about line:

‘Whether further tightening of monetary policy is required to ensure that inflation returns to target in a reasonable timeframe will depend upon the data and the evolving assessment of risks’.

The statement also repeated that returning inflation to target remains a priority for the Board and that services inflation has remained persistent:

‘There are still significant uncertainties around the outlook. While there have been encouraging signs on goods inflation abroad, services price inflation has remained persistent and the same could occur in Australia. There also remains a high level of uncertainty around the outlook for the Chinese economy and the implications of the conflicts abroad’.

Overall, this was a less hawkish meeting than some expected, with some desks believing that the central bank is done and dusted with rate hikes in this cycle. However, market pricing, as of writing, is only forecasting 23bps of cuts next year. This is evidently different from the Fed, the European Central Bank (ECB) and the Bank of England (BoE), forecasted to cut by more than 100bps in 2024.

February’s RBA meeting will be of particular interest, given the Q4 inflation numbers are due in late January. Any upside surprises in data, therefore, may still be met with further policy tightening, so rate hikes are certainly not off the table for the time being.

The hold guided the AUD/USD exchange rate immediately southbound and had the currency pair shake hands with its 200-day simple moving average (SMA); the Aussie dollar is a clear underperformer across the G10 FX space as of writing. Domestic equities—the ASX 200—rallied following the rate announcement, though upside was short-lived.

Looking Ahead

US ISM services PMI (for November) and the US JOLTs Job Openings (for October) release will claim the macro spotlight later today at 3:00 pm GMT. The median estimate for the ISM services print indicates a slight increase to 52.0, up from October’s reading of 51.8, while for the US JOLTs release, Job openings are expected to slow to 9.3 million, down from 9.55 million in September (the estimate range is between 9.52 and 9.2 million).

The JOLTs number will be particularly monitored closely in light of Friday’s widely anticipated NFP print; any marked softness in today’s data will likely weigh on the buck and ramp up expectations of further Fed rate cuts next year.

Markets

The US dollar advanced on Monday, clearing offers around the 200-day simple moving average (SMA) at 103.57 and resistance on the daily timeframe at 103.62, according to the US Dollar Index. This, technically speaking, opens the door for further upside to daily resistance at 104.15. On the other side of the FX fence, the EUR/USD is currently seen making its way south of its 200-day SMA ($1.0820), a move that may encourage breakout selling towards daily support at $1.0699.

On Monday, major US equity indices started the week lower after posting a five-week winning streak. The Dow Jones Industrial Average fell 41 points (-0.1%) to 36,204, the S&P 500 dropped 24 points (-0.5%) to 4,569, and the Nasdaq 100 was down 157 points (-1.0%) to 15,839.

In the commodities space, spot gold (XAU/USD) was everywhere yesterday, and for good reason. The precious metal touched gloves with fresh all-time highs of $2,148 in early Asia before giving up earlier gains and actually closing the day in the red. It also chalked up an eye-popping bearish outside reversal pattern on the daily scale and landed price within striking distance of trendline support taken from the low of $1,810.

Gold Daily Chart:

(Trading View)

In the crypto market, BTC/USD was another headliner yesterday. For more on this major crypto, consider reading yesterday’s post by the FP Markets Research Team here.

G10 FX space as of 08:55 am GMT:

(Trading View)

Thanks for reading. Have a great day.

DISCLAIMER:

The information contained in this material is intended for general advice only. It does not take into account your investment objectives, financial situation or particular needs. FP Markets has made every effort to ensure the accuracy of the information as at the date of publication. FP Markets does not give any warranty or representation as to the material. Examples included in this material are for illustrative purposes only. To the extent permitted by law, FP Markets and its employees shall not be liable for any loss or damage arising in any way (including by way of negligence) from or in connection with any information provided in or omitted from this material. Features of the FP Markets products including applicable fees and charges are outlined in the Product Disclosure Statements available from FP Markets website, www.fpmarkets.com and should be considered before deciding to deal in those products. Derivatives can be risky; losses can exceed your initial payment. FP Markets recommends that you seek independent advice. First Prudential Markets Pty Ltd trading as FP Markets ABN 16 112 600 281, Australian Financial Services License Number 286354.