3rd May 2022 - All eyes on RBA's policy decision


Market Headlines

US stocks started the week higher after staging a turnaround minutes before Monday's close as investors braced themselves for this week's Federal Reserve policy meeting. The Dow Jones Industrial Average was up 0.3% to 33,061.50, the S&P 500 rose 0.6% to 4,155.38 and the Nasdaq Composite ended 1.6% higher to 12,536.02 after a volatile trading session. Real estate posted the steepest declines among the sectors while communication services was the top gainer. The US 10-year yield surged 9.4 basis points to 2.98%. West Texas Intermediate crude oil futures advanced $1.06 to $105.75 per barrel.


In economic news, the Institute for Supply Management's US manufacturing index fell to 55.4 in April from 57.1 in March, compared with expectations for an increase to 57.6 in a survey compiled by Bloomberg. "In April, progress slowed in solving labor shortage problems at all [the] tiers of the supply chain," ISM Manufacturing Committee Chairman Timothy Fiore said. The reading is "still well in expansion territory, but momentum continues to slow" and is now at the weakest level since September 2020, Jefferies economists Thomas Simons and Aneta Markowska said in a research note.


According to the CME Group's Fed Watch Tool, the probability of a 50 basis-point interest rate increase to the 0.75% to 1% target range is almost 100% at a policy meeting on Wednesday. At the next month's meeting, the probability of the target range being increased further to 1.5% to 1.75% is 87%, implying most market participants continue to expect the Federal Reserve to lift interest rates at a brisk pace to control red-hot inflation.


Meanwhile, March factory orders and job openings, scheduled for release Tuesday, will continue to give the Federal Reserve the ammunition to raise interest rates by at least 50 basis points on Wednesday with factory orders expected to increase 1.2% and job openings (JOLTS) remaining near a record high.


Currencies

AUD/USD pair edged lower on Monday as risk-off led financial markets. Falling gold prices weighed on the Aussie ahead of the Reserve Bank of Australia monetary policy announcement. Expect volatility in AUD today against all major currency pairs off the back of the interest rate decision.


USD/JPY regained positive traction and reversed a part of Friday’s heavy losses. The BoJ’s dovish stance, improving risk sentiment weighed on the safe-haven JPY. Aggressive Fed rate hike bets underpinned the USD and offered additional support.


EUR/USD pair maintain its bearish bias and trades near its 2022 low amid central banks’ imbalances and mounting tensions between the EU and Russia. Ultimate target at 1.0339, the multi-year low posted in January 2017.


GBP/USD has extended its daily slide below 1.2500 with the dollar capitalizing on rising T-bond yields. Softer-than-expected US data partially limits the dollar’s strength.


Currency ranges over the last 24 hours


Market Outlook

The Federal Reserve and Bank of England this week are expected to take fresh steps to curb inflation that is running at multidecade highs, while U.S. employment data is forecast to show another strong month for the labor market.

Tuesday

RBA interest rate decision. Today will be a massive day for the RBA as we await their commentary and decision on interest rates.

Wednesday

After a slight narrowing in February, the U.S. trade deficit in goods and services likely widened to a record in March as American businesses and consumers slaked their demand for capital goods, cars, computers, food and other products by purchasing them from overseas.

Federal Reserve officials are poised to raise the benchmark interest rate by half a percentage point and approve plans to start shrinking the central bank's $9 trillion asset portfolio. The moves are part of a double-barrelled effort to slow the economy and ease inflation, running at a four-decade high.

Thursday

The Bank of England is expected to announce its fourth rate increase in as many meetings of its policy-making body as inflation rises to levels last seen three decades ago. But with surveys pointing to a slowdown in consumer spending as recent tax increases squeeze household incomes, policy makers might signal that they don't intend to go much further.

Friday

U.S. employers added an average of 562,000 jobs a month in the first three months of the year, a historically solid pace that has brought employment nearer its prepandemic level, pushed the unemployment rate toward a 50-year low and driven wages higher. The Labor Department’s employment report for April is expected to show another strong month for job gains. Economists will be watching for signs that more people are joining the workforce, potentially easing wage pressures.

Upcoming Events

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  • Euro Area unemployment rate March

  • JOLTS Job Openings March

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Disclaimer: This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711. The material contains general commentary only and does not constitute investment or any other advice. Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors. This information has been prepared without considering your objectives, financial situation or needs. Please seek your own independent legal or financial advice before proceeding with any investment decision. The information is believed to be accurate at the time of compilation and is provided in good faith. Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract. This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change. Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.


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Disclaimer

This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711.  The material contains general commentary only and does not constitute investment or any other advice.  Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors.  This information has been prepared without considering your objectives, financial situation or needs.  Please seek your own independent legal or financial advice before proceeding with any investment decision.  The information is believed to be accurate at the time of compilation and is provided in good faith.  Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract.  This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change.  Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.Navigate Global Payments Pty Ltd nor its related parties or officers accepts no liability whatsoever for any loss or damages suffered through any act or omission taken as a result of reading or interpreting any of the information contained or related to this site.