Morning Bid: RBA holds and the dollar pauses, too. From Tom Westbrook, here’s a look at what the day holds for markets worldwide and in Europe. The Australian central bank provided investors with more reason to stabilize the falling value of the United States dollar on Tuesday by maintaining its “data-dependent” view and keeping interest rates at their current level, as was anticipated.
The markets have read the Reserve Bank of Australia’s position as being dovish. Even though the decision had a few shocks, they sold the fact throughout the Asia session, which temporarily caused the Australian dollar to fall below its 200-day moving average.
The broader U.S. dollar index is now trading slightly above its 200-day moving average, which is getting support from some ripples of doubt on whether or not the “soft landing” that has been priced in for the economy of the United States is realistic.
The relative interest rate prognosis for the United States is consistent with the narrative that the dollar is weaker. Futures markets are pricing a more significant rate reduction by the Federal Reserve than any other major or emerging market central bank in the coming year.
However, will the Federal Reserve reduce interest rates by 125 basis points the following year? Dollar sales have been slowed due to concerns over that potential outcome. There is little doubt that other central banks will reduce their policy rates by more than what the markets are now forecasting, even if the Federal Reserve does go that far.
The price of gold, which had reached a new all-time high during the famously thin early hours in Asia on Monday, has seen a significant decline.
The attention is now shifting to the statistics for job vacancies in the United States, which are expected to be released later on Tuesday, and the figures for non-farm payrolls, which are expected to be released on Friday. Resilience on any front has the potential to frighten the bears of the dollar.
The final figures of the PMI and producer prices are also expected to be released today in Europe. In other parts of Asia, China’s stock markets continued their downward trend, showing signs of becoming the third year in a row of extreme underperformance compared to the general performance of global share markets.
During a year in which MSCI’s measure of global stocks increased by almost 15%, the Hang Seng (.HSI) index of Hong Kong saw a decline of over 17%. The low values aren’t showing signs of luring investors back into the market.
A solid proxy for national data, Tokyo inflation, slowed down sufficiently in November to maybe provide the Bank of Japan some flexibility for a patient voyage out of its ultra-easy policy. This is because Tokyo inflation is a reliable proxy for national data. The value of the yen remained the same at 147 to the dollar.
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