Market update: Dovish RBA to buy bonds for longer

Stuart Cowell HFM

Market news today

RBA leaves rates unchanged – but surprises by extending AUD 4 bln/week Bond purchases until February (from November)- “Delta outbreak is expected to delay, but not derail, the recovery”. No rate hikes expected until 2024 (no change). AUD spiked on no change to 0.7468, down to 0.7410 on Bond news, back to 0.7425 now.
USD (USDIndex 92.18) continues to hold over 92.00.
Yields ticked up; as Treasuries slipped, (10yr 1.34%).
Equities pushed higher in Asia Nikkei +1.3% again to today on expectation of more stimulus & JPY data, (Earnings & Leading strong, big slip for Household spending). – USA500 FUTS at new highs 4548 earlier).
USOil recovers from $68.00, back to $69.00 now, on positive news from Asia session.
Gold slips to $1816 now, from 1828 yesterday & 1833 on Friday.
Overnight – Major beat for Chinese trade, exports in particular pushing trade surplus over $8bn better than expected. ($58bn vs 50bn). German Industrial production & CHF Unemployment inline with expectations.

Military coup in Guinea (one of the world’s biggest suppliers of bauxite, a necessary component of aluminium) – saw aluminium at its highest in more than a decade due to supply concerns.

European Open – December 10yr Bund future down -7 ticks at 172.29, with Treasury futures underperforming slightly. DAX & FTSE 100 futures down -0.1% & -0.2% respectively, indicating a lower open for European markets. RBA decision to stick to taper plans, albeit extending the time frame, should not dent the likely ECB move to scale back monthly purchase volumes closer to those seen in Q1. That would still mean sizeable support & Lagarde is likely to sweeten the pill with an affirmation of the very dovish guidance on interest rates. EURUSD & Cable at 1.1864 & 1.3825 respectively. USDJPY at 109.92 from Monday’s low at 109.68.

Today – German ZEW Survey, EZ Revised GDP and Final Employment, ECB weekly purchases. Government treasuries from the UK, Germany and the US.

Biggest Mover @ (06:30 GMT) GBPAUD (+0.32%) All AUD pairs volatile on surprise from RBA, 1.8550 to 1.8650. Faster MA’s aligned higher, MACD signal line & histogram breaking above 0 line and rising. RSI 63.88 and rising. H1 ATR 0.0023, Daily ATR 0.0112.

Author

Stuart Cowell

HFM

With over 25 years experience working for a host of globally recognized organisations in the City of London, Stuart Cowell is a passionate advocate of keeping things simple, doing what is probable and understanding how the news, c

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