RBA lift rates 25bps as they continue to fight inflation

Good morning

The market is still looking closely at US data releases and anything that looks strong seems to push USD higher. Yesterday it was the Services ISM that came in on the strong side and sent USD higher, GBPUSD trading from 1.2240 to below 1.2200 and EURUSD from 1.0550 to below 1.0500. We have actually seen quite a range in both pairs since the start of the week, GBPUSD traded between 1.2320 and 1.2165, EURUSD 1.0595 to 1.0475.

RBA did raise rates 25bps as expected and they make it clear they are still ready to act in their battle against inflation. Further rate moves will be data dependent but with Aussie inflation expected to increase in the coming months, more rate rises are expected. No indication of where they see rates peaking. AUD did push a bit higher on the release but is pretty much back to pre-announcement levels as I type. With rates now 3.1%, some feeling the next move may be 15bps to bring the rate to 3.25%.

There is more talk of relaxing Covid restrictions in China. Their official infection rates are falling, although their numbers can be whatever they want them to be. Still a little far from a complete reopening but each day seems to bring further easing. China trade data will be interesting overnight, another hefty surplus is expected although one would think it would be smaller than last months $85bn as lockdowns took their toll.

Brazil looked pretty comfortable as they beat South Korea to move into the next round of the world cup. If things go to plan, England could meet them in the final, but there is plenty of football to be played before then. Today sees Morocco take on Spain in the afternoon game, while Portugal and Switzerland will battle it out in the evening match, the last of this round of knockout matches before the quarter finals begin on Friday. So far its been a pretty decent world cup.

Eng;and’s cricket team overcame some decent resistance from Pakistan yesterday to win the first test match. It was quite a thrilling affair by all accounts and hopefully is a taste of things to come.

CAD watchers should keep an eye on the Ivey PMI numbers this afternoon, otherwise not a great deal on the calendar. I’m out and about a bit this afternoon so hoping the markets stay quiet.

- 13.30 US goods trade balance

- 13.30 CAD intl trade

- 15.00 CAD Ivey PMI

- 00.30 AUS GDP

- 03.00 China trade balance