Spreadex Market Update
Global Markets React to Shifting Trends and Key Data Releases
Global financial markets navigated through shifting trends as rising global yields weighed on equities, while key economic indicators hinted at a potential soft landing for the US economy. Notable developments included the recovery of the British Pound after dovish remarks and the surge in crude prices following Saudi Arabia's production cut announcement.
Key Factors for Today
- Global Yields Rise, Exerting Pressure on Equities
- US Data Indicates Potential Soft Landing, Influencing USD
- British Pound Recovers from Dovish Hike Losses After Bailey's Comments
- Crude Oil Prices Surge 2.55% due to Saudi Arabia's Production Cuts
- RBA Trims Core Inflation Outlook, Impacting AUD/USD
Market Movers
- US 10-year yield hits highest since November, impacting equities.
- Preliminary US non-farm productivity exceeds expectations at 3.7%.
- Labour costs rise less than anticipated at 1.6%, indicating inflation control.
- British Pound rebounds from initial weakness after Bailey's remarks.
- Crude oil prices surge 2.55% following Saudi Arabia's extended production cuts.
- RBA revises core inflation outlook downward, affecting AUD/USD.
Economic Calendar
- EA Retail Sales
- CA Employment Change
- Non-Farm Payrolls
- Ivey PMI
The Big News
Global Yields Impact Equities
The relentless rise in global yields persisted, leading to a curve steepening that put pressure on equity markets worldwide. This trend was especially evident as investors cautiously gauged whether central banks' rate hikes had concluded. Notably, the benchmark US 10-year yield soared to its highest level since last November, creating an environment of uncertainty for equity investors.
US Data Hints at Soft Landing
Key US economic indicators pointed towards a potential soft landing for the US economy, alleviating concerns of runaway inflation. Preliminary data revealed non-farm productivity surpassing expectations, indicating improved efficiency. Additionally, labour costs rose at a more moderate pace than predicted, reaffirming the narrative that inflation might be coming under control. These figures collectively bolstered the case for a gentle economic deceleration, leading to a decline in bullish bets on the US Dollar (USD).
British Pound's Resilience
The British Pound initially experienced weakness following a dovish interest rate hike. However, the currency swiftly regained ground after Governor Andrew Bailey's press conference. Bailey's emphasis on concerns over services inflation fuelled expectations of another rate hike in the near future, prompting a recovery in the Pound's value. The currency managed to close flat against the USD, showcasing its resilience in the face of mixed market sentiments.
Crude Oil Rally on Saudi Cuts
Crude oil prices experienced a notable upswing, surging by 2.55%, subsequent to Saudi Arabia's announcement of extended production cuts. Despite expectations of this move, the market responded positively, particularly in the lead-up to the OPEC+ meeting. While the price rally did not fully recover losses from the previous day, it demonstrated the impact of supply-side dynamics on market sentiment, with potential price testing looming unless specific levels were breached.
RBA's Cautious Inflation Outlook
The Reserve Bank of Australia (RBA) revised its core inflation outlook in its Statement on Monetary Policy (SOMP) report. Notably, the RBA expressed the belief that the complete impact of past rate hikes was yet to unfold. While acknowledging a positive trajectory in inflation, the bank lowered its forecast for core inflation, indicating a gradual moderation. This adjustment had a relatively subdued impact on AUD/USD, with the currency pair making marginal gains amid the cautious economic outlook.
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