Market Update – 4th July 2018 – RBA Keeps Rates On Hold At 1.5%, But Higher Rates On The Way

The RBA kept rates on hold yesterday at 1.5%, extending to 22 months the streak at which rates have been on hold at 1.5% – also a record low. Interest rates could however start rising perhaps in the next 12 months with inflation at just over 2%. The RBA noted in their statement “a gradual pick-up in inflation is, however, expected as the economy strengthens. The central forecast is for CPI inflation to be a bit above 2 per cent in 2018.” The RBA’s target for inflation has typically been 2-3% so an increase into the 2-3% range could signal the next move in rates to be upward. What does this mean for the Aussie dollar? Well, its potentially a bullish sign and the market agrees. AUD/USD and the other major crosses all moved higher by around 0.5-1% following the RBA statement yesterday afternoon.

In other news European stocks gained, while U.S stocks lost ground. Asian stocks finished yesterdays session mixed. Commodities prices remain under pressure, with Zinc, Nickel, Copper and Iron ore all losing ground. Uranium prices rallied again supporting the narrative that they have bottomed after a 10 year bear market.

Trade balance figures along with retail sales are due out today. The RBA and myself as a MYER shareholder will be hoping for a bounce in retail sales, but very indebted households and rising rates could well be a catalyst for continued poor retail sales numbers.

AUD EXCHANGE RATES:

AUD/USD – 0.7382

AUD/GBP – 0.5595

AUD/EUR – 0.6331

AUD/NZD – 1.0928

AUD/JPY – 81.594

USD/BTC – $6,468

OTHER MARKETS: 

All Ords (XAO) – 6,302

Gold – A$1,697/oz

Silver –  A$21.70/oz

WTI – US$73.16/barrel

DATA RELEASES TODAY:

AUD – Retail Sales at 11.30am

AUD – Trade Balance at 11.30am

GBP – Services PMI at 6.30pm