The Reserve Bank of Australia (RBA) kept rates on hold at 4.1% during today’s Asia-Pacific session, as expected. The bank also left the door open to more hikes if necessary. However, the market reaction was a tad surprising, with the AUD seeing a chunky move lower despite no surprises from the bank.
On the commodity side, precious metals continued their recent fall, with gold trading close to a 7-month low. The driver for the downside remains the stronger USD and Treasury yields. Any meaningful recovery in gold will require the USD and yields to take a breather.
Swiss CPI came in softer-than-expected this morning, with the YY headline printing at 1.7% versus forecasts of 1.8%. However, the move from 1.6% to 1.7% is still acceleration and means trading CHF lower is not as attractive as a miss of 1.6% or lower would have been.
Overall sentiment is leaning to the negative side as we start the EU session, with equities, commodities, and high beta FX lower. Markets have a keen focus on this week’s incoming US data, so watching the latest JOLTS release will be important as a driver for short-term vols.
The JPY is leading the major currencies to the upside after FX comments from Japanese officials. The AUD is the weakest of the majors as base metals take another plunge and the RBA offers no surprises.
The main highlight for today will be the US JOLTS job openings data. With yields very close to new cycle highs and the USD having seen 11 weeks of straight gains, the risk-reward of chasing them higher at these levels is not attractive, even if the data comes in better than expected.
The other asset to watch is gold, as a big miss in the data could give gold a decent nudge higher if both the USD and yields pull back a bit.
The one asset that could be interesting to trade on a really big beat in the JOLTS data is equities, which could see some extension to the downside if the data should surprise meaningfully to the upside.
In summary, the market is in a bit of a negative mood today as we await the US JOLTS job openings data. The USD is still strong, yields are high, and commodities are getting hammered. If you’re looking to trade today, be careful and keep an eye on the JOLTS data.
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