Global shares ease after strong November
The Australian dollar led losses overnight as global shares turned lower.
US technology stocks were the hardest hit with the Nasdaq falling 1.2% as equity markets continued to ease in the first few days of December. In November, US shares surged, with the S&P 500’s 8.9% gain the best monthly performance since July 2022.
The more cautious sentiment across markets saw risk-sensitive currencies lower.
The AUD/USD fell 0.8%.
In Europe, the EUR/USD lost 0.4% while the GBP/USD lost 0.5%.
The USD/JPY gained 0.3% while the USD/CNH climbed 0.4%.
RBA seen likely on hold
The Reserve Bank of Australia looks likely to keep rates on hold at its decision due at 2.30pm AEDT. The new governor Michele Bullock expressed greater worry about inflation in a speech on 22 November 22 and the RBA has been communicating in more hawkish ways in recent weeks.
But it’s possible that some of the purpose of this correspondence was to clarify why the RBA raised rates in November after a four-month hiatus.
After last week’s weaker retail sales and inflation numbers, we believe that the latest evidence is inadequate to support a back-to-back hikes. According to market pricing, there is a 5.0% chance of a 25-basis point hike (source: Refintiv).
However, the RBA won’t want to let the consumer “off the hook” given the ongoing concerns about inflation, the approaching holidays and the related shopping season, and the two-month break that will follow this meeting. The RBA’s policy advice may revert to a more explicit indication that more tightening could be necessary, rather than addressing the question of “whether” further tightening is necessary.
Along with Chinese equities and industrial commodities, AUD/USD has been under pressure through most of 2023.
Emerging FX hit as sentiment shifts
With global shares and commodities lower, emerging markets were caught up in the selling.
Most notably, gold produced a substantial reversal, turning from an all-time high of USD2135 to end down 2.0%. Crude fell 1.0% while copper lost 2.4%.
Around the region, the Philippines peso fell after touching three-month highs.
Today, we’re looking for Philippines inflation to decrease even further in November, from 4.9% in October to 4.4% y-o-y, driven by reduced retail gasoline costs as a result of decreased global crude oil prices. In addition to decreasing demand conditions and household spending, food and power costs were also comparatively constant, which we believe supported a small decline in core inflation to 4.7% from 5.2%.
PHP has benefited from the oil prices being reasonably well controlled despite the tensions in the Middle East.
Aussie lower ahead of RBA
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 4 – 9 December
All times AEDT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
