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The RBA increased their cash rate by 50bps to 2.35% early Tuesday. The pound advanced as the UK’s new Prime Minister promised to cut taxes and 130Billion pounds to freeze bills. The rate-sensitive Yen is weak across the board as the BoJ maintains its ultra-loose stance on rates. The Dollar remained firm as bets on aggressive policy tightening remain high. Elsewhere, OPEC+ agreed to a 100K bpd output cut to slow declining oil prices.
GBPJPY soared by +1.36% as the UK swears in new Prime Minister, Liz Truss, who promises 130Billion pounds to tackle the energy crisis. The sterling found a strong footing on upbeat Construction PMI data which rose to 49.2 vs 48.0 surveyed showing an expansion in the construction industry. The Yen showed broad weakness across the board as other central banks are moving ahead on policy tightening while the BoJ sticks to ultra-loose policy. The pair rose from 162.00 and just a few pips away from 164.500 after breaching a 27-day high at 164.00. An extended rally may face resistance at 164.80 and 165.00.
NZDUSD plunged by -0.34% ahead of the US ISM Non-Manufacturing PMI data release. The data is expected to drop to 55.1 from 56.7 in July but remain in an expansionary region. High expectations of an aggressive 75bps rate hike by the Fed remain support for the buck. New Zealand’s Global Dairy Trade Price Index will be due in the New York session. The pair`s bulls got rejected at 0.6130 and bears may reclaim 0.6050 and 0.6000 in the short term.
AUDCAD dipped by -0.38% in the aftermath of the RBA rate decision. The central bank hiked its cash rate by 50bps to 2.35% and the AUD failed to capitalize on it. The oil-backed CAD remained resilient despite dipping oil prices. On Wednesday the BoC will be meeting for an anticipated 75bps hike which may take the CAD further up. The pair left resistance at 0.8950 and retested at 0.8880, a 6-week low. A move below may give bears 0.8800 in the short term.
European stocks traded in the positive zone on Tuesday after a sharp decline. The FTSE100 rose +0.37% trading above 7300. More momentum to the upside is capped by 7350 in the near term. CAC 40 surged by +0.68% after bouncing off a 6000 support on Monday. Further up the index may take 6200 and 6250. DAX gained +0.97% after German factory orders slumped to -1.1% in July from -0.5%.
US Stock futures rallied on Tuesday as investors maintain an optimistic mood ahead of US ISM data. S&P500 futures advanced by +0.48% towards the 4000 level, a psychological barrier. Critical levels to watch are the 3970 and 3900 support. Nasdaq100 futures surged by +0.60% and upside gains are capped by the 12500 level, a 6-day high. Near-term support is at the 12100 level. DJIA index futures was up by +0.36% reclaiming the 31500 level and the next key resistance level is at the 32000 psychological level.
Gold pares intraday gains on Dollar strength as the US supersized rate hike fears dominate. The non-yielding yellow metal is now trading flat at +0.08% after a rejection at 1720 intraday resistance. On the downside, the precious metal may retest 1700 and 1680.
