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Analysis

RBA hikes as wages rise

BY Janne Muta

|June 6, 2023

The Reserve Bank of Australia (RBA) surprised the markets with a 25 basis points hike. The central bank acknowledges that while inflation has peaked, it still remains at elevated levels. The RBA anticipates that it will take some time for inflation to return to its target range. Wages have increased in response to the tight labour market and high inflation which makes inflation stickier and more difficult to manage.

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The major indices declined slightly in yesterday’s trading following a report by the Institute for Supply Management (50.3, 52.6 expected, 51.9 prior) indicating slower expansion in the services sector than anticipated. The data from ISM suggests a potential slowdown and has prompted speculation on the Fed refraining from further rate hikes.

Stocks, however, slipped lower with the DJIA dropping by 0.61%, the S&P 500 decreasing by 0.2%, while the Nasdaq closed almost unchanged (-0.09%). Treasury prices slightly moved higher, leading to a minor decrease in yields. The DAX and FTSE indices also experienced declines of 0.69% and 0.39% respectively.

USOIL finished the day flat, while gold rose by 0.70%. USOIL price rallied after OPEC+ production cut announcement but then dropped lower again on worries over the global economy. Currency pairs displayed slight movements, with the USDJPY decreasing by 0.28% and the EURUSD pair remaining practically unchanged.

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AUDUSD

AUDUSD is bullish above 0.6609. Below the level, the market could trade down to 0.6580. However, the market is currently relatively far from the nearest support level (0.6638) so a retracement is possible before the resumption of the up trend. A surprise rate hike (25 bp) from RBA supports the market.

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GBPJY

GBJPY is bullish above 172.52. Above the level, look for a move to 174.80 and then possibly to 178.60 on extension. Below 172.52, look for a move to 171.50.

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EBAY

EBAY is bullish above 44.90 and could trade higher to 46.40. Below 44.90, look for a move to 44.28.

The Next Main Risk Events

  • CAD Ivey PMI
  • AUD RBA Gov Lowe Speaks
  • AUD GDP
  • CHF Foreign Currency Reserves
  • CAD BOC Rate Statement
  • CAD Overnight Rate
  • CHF SNB Chairman Jordan Speaks
  • USD Unemployment Claims
  • CNY CPI
  • CNY PPI
  • CNY New Loans
  • CAD Employment Change
  • CAD Unemployment Rate

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst
TIOmarkets

DISCLAIMER: TIOmarkets offers exclusively consultancy-free service. The views expressed in this blog are our opinions only and made available purely for educational and marketing purposes and do NOT constitute advice or investment recommendation (and should not be considered as such) and do not in any way constitute an invitation to acquire any financial instrument or product. TIOmarkets and its affiliates and consultants are not liable for any damages that may be caused by individual comments or statements by TIOmarkets analysis and assumes no liability with respect to the completeness and correctness of the content presented. The investor is solely responsible for the risk of his/her investment decisions. The analyses and comments presented do not include any consideration of your personal investment objectives, financial circumstances, or needs. The content has not been prepared in accordance with any legal requirements for financial analysis and must, therefore, be viewed by the reader as marketing information. TIOmarkets prohibits duplication or publication without explicit approval.

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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