Choppy Action Yesterday on Mixed PMI Results & US Earnings

The US Dollar continues to tread water ahead of the Fed next week with the greenback recording another very muted session yesterday. Action across markets was fairly mixed on the back of the latest round of PMI reports. Data was a little better than forecast out of the eurozone, a little weaker than expected out of the UK and a little better than expected out of the US – though both US services and the factory sector remained in negative territory. Overnight we saw Aussie and Kiwi inflation data both coming out above expectations, keeping hawkish RBA and RBNZ expectations well-anchored. Today, traders will be looking at the BOC rate decision with market pricing in a smaller 25bps hike.

Key Factors for Today

- USD sees very light flows as traders await Fed next week
- Mixed action in equities following PMI releases
- AUD rallies on inflation beat – hawkish RBA expectations
- Gold rally pauses – crude turns lower

Coming Up

- CAD – BOC Monetary Policy Meeting
- EUR – German Ifo Business Climate
- CHF – Credit Suisse Economic Expectations

Mixed Equities Action Following PMIs

Equities markets saw mixed action again yesterday. UK and European markets were lower over the day, the latter still pulled down by fresh hawkish ECB commentary in recent days. In the UK, a further drop in the manufacturing PMI was more the culprit. Nikkei was the strongest performer over the day with the index still well-supported on the back of the BOJ sticking to its ultra-loose monetary policy last week.

Tech Rallies Despite Microsoft Revenues Miss

US stocks were mixed amidst the latest slew of US earnings. Microsoft reported better-than-forecast EPS but on weaker revenues. However, the stock gained in after-hours trading and the Nasdaq was seen higher across the day as other key names, including Verizon, topped market forecasts. A technical glitch at the start of trading yesterday, however, saw many big names frozen, leading to wild price swings as the glitch resolved, the SEC will now investigate the incident.

Aussie Rallies on Fresh RBA Hike Expectations

AUD has been the strongest performer over late Asian and early European trading on Wednesday. Overnight, the latest CPI figures came out above expectations, once again, highlighting that the RBA’s fight with inflation is far from over. On the back of the data the market’s RBA expectations have shifted back in favour of a larger hike at the next meeting as year-on-year CPI jumped back up to 8.4% from 7.3% prior. Overall, in 2022, inflation was seen at 7.8%, marking 33-year highs.

Gold Rally Pauses – Crude Turns Lower

In the metals and commodities space, gold and silver are back under pressure today following a better showing yesterday. Gold is faring a little better, holding near highs, while silver remains within the block of consolidation which has framed price action over the last two-months. Crude prices turned lower again also on the back of yesterday’s PMI readings. The data showed that global activity is still struggling and with fresh concerns over the demand outlook in China, crude looks vulnerable to further losses near-term.