A deep dive into RBA’s concerns and key market moves

RBA's tightening stance

In its 7 November meeting, the Reserve Bank of Australia (RBA), under governor Michele Bullock, raised the cash rate target by 25 basis points to 4.35%. This move, aimed at tackling inflation, has significant implications for the Australian economy and global markets. RBA’s decision elevated borrowing costs to their highest point since January 2011, signifying the 13th rate hike since May 2022. This increase reflects the persistence of inflation, which has exceeded expectations from a few months prior, primarily due to a continued surge in service prices. Current projections place CPI inflation around 3-1/2% by the end of 2024, reaching the upper limit of the 2 to 3% target range by the end of 2025.

Key takeaways from RBA minutes

The minutes highlighted worries about high inflation, particularly fuel prices affecting headline inflation. Despite a slowdown in output growth and cost of living pressures, labour markets remain tight, with housing rent inflation at a notable 10%. 

Market impact

Following the release of these minutes, AUD/USD showed a rally towards 0.6583. However, the AUD/JPY pair is in focus, with a retreat observed due to the JPY's relative strength. 

This shift warrants close attention, especially with Pimco’s increasing yen-long positions and potential BOJ interventions.

Other Asian shares

The Nikkei Index in Japan saw a slight increase, maintaining its position near the 33-year peak reached on Monday (20 Nov). The index has risen approximately 28% over the course of this year, positioning it as the top-performing stock market in Asia. 

Analysts anticipate a subdued trading activity this week due to the US Thanksgiving holiday on Thursday, 23 November, and a light schedule of data releases that may influence market dynamics. 

European markets remain cautiously optimistic

Given the empty economic calendar in Europe, European stocks are holding onto last week's gains. This is evidenced by the Eurostoxx 50 futures rising by 0.18%, German DAX futures gaining 0.14%, and FTSE futures increasing by 0.01%

Today's Australian stock market overview

The Australian stock market's reaction to these global and domestic events provides a real-time barometer of investor confidence and market trends.

Key global economic events ahead

• FOMC minutes on the horizon: Investors are on edge for the release of FOMC minutes, which could provide crucial insights into the Federal Reserve's monetary policy direction amidst global economic uncertainties.
• UK’s fiscal health in focus: The UK Autumn Statement is another pivotal event, expected to shed light on the country’s fiscal strategies in these turbulent economic times.
• Japan’s inflation data: With Japan set to release its CPI data, the markets are bracing for potential impacts on monetary policies and currency valuations.

Corporate spotlight

Nvidia’s Q3 earnings on Tuesday, 21 November, will be a critical indicator for tech and stock markets, offering insights into sector health and investor sentiment. 

Stay ahead with market radar

As the week progresses, stay tuned to Market Radar for insightful weekly analysis and actionable insights on how these crucial economic events can impact global markets.