RBA hikes rates, focus on Fed’s Powell speech
The Reserve Bank of Australia (RBA) raised interest rates as economists had forecast. However, the post-meeting remarks revealed that the board could change its strategy regarding rate hikes. Investors and traders will be focusing on Jerome Powell’s semi-annual testimony before the Senate Banking Committee.
RBA raises benchmark interest rate by 0.25%
The RBA hiked its benchmark interest rate by 25 basis points, in line with analysts’ expectations. The rate stands now at 3.60%, which is an 11-year high. The RBA’s governing board noted in its post-meeting announcement that “the Board expects that further tightening of monetary policy will be needed to ensure that inflation returns to target and that this period of high inflation is only temporary.”
Economists mentioned that the RBA’s board dropped February’s reference to multiple upcoming rate rises. The Australian dollar lost ground against other currencies as traders believe that this could indicate a shift in the RBA’s policy.
Fed chair to testify before the Senate
The Fed’s chair, Jerome Powell, is scheduled to testify before the Senate Banking Committee. Powell is expected to share insights regarding the central bank’s future monetary policy. The semi-annual monetary policy report to US lawmakers may give more info on the issue of hiking interest rates in the following months.
San Francisco Federal Reserve Bank President Mary Daly told reporters that further interest rate hikes would be possible if inflation and labour market data continue to come in hotter than anticipated. “If the momentum in the economy is reaccelerating, and inflation is moving off of its disinflationary trend and into a period of accelerating inflation, then I'm prepared to do more in terms of the level of the interest rates that will be necessary to really bring us to price stability,” she noted.
China’s trade surplus beats expectations
Data released by China’s General Administration of Customs showed that China’s total trade surplus reached $116.88 billion in January and February compared to $78.01 billion reported in December.
Exports fell by 6.8% on an annualised basis, while imports dropped by 10.2% on a year-to-year basis. Outgoing Premier Li Keqiang said that the volume of trade in goods surpassed expectations in 2022.
Eurozone GDP Q4 2022 report to be released
The euro bloc’s economic growth in the fourth quarter of 2022 will be the topic of the upcoming Eurostat report. Economists forecast 0.1% growth on a quarterly basis and 1.9% growth on a year-to-year basis.
High inflation and the ECB’s monetary policy tightening continue to weigh on the euro area. A report by Reuters noted that the ECB’s head Christine Lagarde said: “Underlying inflation in the Eurozone will stay high in the near term, so a 50 basis point European Central Bank (ECB) interest rate increase later this month is increasingly certain.” Lagarde added that the eurozone’s economy holds up better than feared and output should accelerate from near stagnation in the closing quarter of 2022.
Eurozone retail sales declined more than expected in January
A Eurostat report published on Monday showed that retail sales in the euro bloc fell more than expected in the first month of the year. Sales dropped by 2.3% on a year-to-year basis, 0.4% more than analysts’ forecast. On a month-to-month basis, retail sales rose by 0.3% instead of 1.0% anticipated by market experts.
ING analysts wrote in a report that “given fourth-quarter weakness and surveys missing the mark recently, performance at the start of the year is clouded in uncertainty. This makes it hard to get a strong view of where the economy is headed in the short term, but if today’s release on retail sales is anything to go by, it doesn’t look like the economy has started a rebound just yet.”
Does trading on macroeconomic news interest you? Learn how this approach works with our free webinars. Meet and interact with expert traders. Watch and learn from live trading sessions.
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.