General Market Analysis 06/06/23

Markets Consolidate Ahead of Central Banks

Global markets experienced a day of consolidation yesterday, albeit at elevated levels, after a strong finish to last week. The major US indices had a mixed day as investors mulled next week’s Fed update, the Dow losing 0.59%, the S&P dropping 0.2% and the Nasdaq closing just above flat. The dollar took a bit of a hit after the first major data release of the week out of the US – the ISM Service PMI came out worse than expected at 50.3 against the expected 52.6. Gold bounced again off the $1,940 level and Oil pulled back after its OPEC-inspired rally, WTI back to trading around the $72/barrel level.

Reserve Bank of Australia the First Cab off the Rank

We have the first major central bank rate announcement for the month today from the Reserve Bank of Australia and like many of their counterparts, the event will be ‘live’ in the sense that there are a couple of possible outcomes that the market is pricing in. With many global central banks in a similar position of trying to battle the twin issues of inflation and pending recessionary conditions, many investors will be watching the first cab off the rank very closely today. Recent inflation data in Australia has pointed to the need for more tightening whereas employment data is showing that the market is starting to cool and recent hikes are having an impact. The market pricing is a 66% chance of ‘no change’ and 33% of another hike. The RBA surprised most of the market last time out with a hike after a pause and the risk is sitting on the same side today. The action takes place at 2.30 pm Sydney time.

Central Banks and Data Ahead

Financial markets took a bit of a breather yesterday as the calendar was relatively thin in terms of macroeconomic data releases, however, we have a couple of big events on the horizon today. In the Asian session to focus will be firmly on the Australian market where the RBA will announce its latest rate decision with investors split on which way they will go. The European session is bereft of major releases but in the US session expect the focus to move north of the border to Canada with the release of the Ivey PMI numbers, a prelim for tomorrow’s Bank of Canada announcement.