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The RBA hit the monetary ‘pause button’ and left rates unchanged. This surprised many pundits, but aped the Federal Reserve, in their recent monetary decision. This is a result of extreme political pressure, rather than any statistical relief on the inflation front. The Fed minutes indicated that rates would continue to rise in the USA and the latest labour markets reports, from the US, only add to the likelihood. The AUD has plunged, from above 0.6700, back to 0.6600, with downside pressure prevalent.

Current Level: 0.5200 (1.9230)
Resistance: 0.5290 (1.8905)
Support: 0.5175 (1.9325)
Last Weeks Range: 0.5180-0.5260 (1.9305-1.9000)

European PMI data was weaker than expected and spread from manufacturing to the services sectors. This reflects widespread recessionary pressures, from slower demand and tighter monetary conditions. The ECB has assured markets that they are firmly committed to their ‘hawkish’ monetary policy cycle, and this has helped support the EURO. The surprise strength in the US labour market only reinforces tight monetary conditions and the mantra, ‘higher for longer’, espoused by ECB President LeGarde.

Current Level:0.5653 (1.7690)
Resistance: 0.5705 (1.7530)
Support: 0.5590 (1.7890)
Last Weeks Range: 0.5600-0.5685 (1.7860-1.7590)

UK PMI data was softer than expected, reflecting the recessionary pressures being suffered in the UK economy, because of softer global demand and extremely tight monetary conditions. The Bank of England continues to reassure markets that tight monetary policy will prevail in the war on inflation. The high interest rates support a stronger than expected British Pound, through interest rate differentials, but risk will become an existential threat.

Current Level: 0.4833 (2.0690)
Resistance: 0.4880 (2.0490)
Support: 0.4790 (2.0875)
Last Weeks Range: 0.4770-0.4820 (2.0965-2.0745)

The RBA rate decision caught many market analysts by surprise. The Bank hit the ‘pause button’ on rate rises, against expectations and bowing to political pressure. The RBA Governor Lowe is under extreme pressure to keep rates low, as Australia is an extremely heavily indebted nation. Lowe is coming to the end of his appointed term and the heat is on! The softer AUD allowed the cross rate to surge towards 0.9300. US Labour market reports of a tighter than expected labour market, drove speculation of further rate rises, to come.

Current Level: 0.9292 (1.0762)
Resistance: 0.9325 (1.0725)
Support: 0.9190 (1.0880)
Last Weeks Range: 0.9240-0.9150 (1.0825-1.0930)

The RBA interest rate decision to ‘pause’ rate rises, followed the Federal Reserve’s lead. The thought process is, to allow the long string of rate rises to permeate the economy and ascertain the impact. It did have a softening effect on Tasman commodity currencies, which accelerated with US Labour Market reports. The ADP private sector jobs report came in, at adding 497,000 extra jobs! Equities crashed and bond yields exploded, adding to support for the US Dollar, forcing the NZD back from above 0.6200, down to 0.6150.

Current Level: 0.6155
Resistance:0.6205
Support: 0.6080
Last Weeks Range: 0.6130-0.6060

Market Overview
This week has been interrupted by the US Independence Day, effective four day, long-weekend. All eyes were on the US labour markets, as the Federal Reserve is looking for this to slacken considerably, (under their tight monetary policy), to effectively contain inflation. The ADP Jobs Report was a shock number, blowing away expectations, by almost double. This was followed by a Challenger report that advised job cuts halved and a Jolts Job Report, that showed a slowing in job openings. These are not what the Fed is looking for and will probably force further rate rises, as indicated by the Fed. All eyes now focus on the Non-Farm Payroll number, to be released tonight.

Major Announcements last week:
.-Fed Minutes Release
-US Labour Market Reports
-RBA Rate Decision
-Non-Farm Payrolls

Market Overview
-Extended long weekend in the USA for Independence Day Holiday
-RBA Rate Decision
-PMI Data releases across Asia, Europe and the USA
-US Labour market reports, culminating in Non-Farm Payrolls, Friday

This week is a shortened trading week, as the US Independence Day holiday, means US markets remain effectively closed until Wednesday. Local markets will be focused on the RBA rate decision and then attention will turn back on US markets and more particularly the labour market. Major Labour market reports will be released during this coming week, including the Challenger, ADP, Jolts and culminating in the all-important Non-Farm Payrolls, Friday. The Fed is looking for the labour markets to ease considerably, before the interest rate rises can be dispensed with.

The EUR has been very stable since the close of the Central Bankers meeting in Portugal, hosted by the ECB. The ECB led the mantra, ‘higher for longer’, driving the narrative of a serious war on inflation. The ECB is well behind most other Central Banks, on the interest rate curve, thus has plenty of latitude for higher interest rates.

Current Level: 0.6095 (1.6405)
Resistance: 0.6170 (1.6210)
Support: 0.6040 (1.6555)
Last weeks Range: 0.6060-0.6100 (1.6500-1.6390)

One major Western economy that suffers greater inflationary pressures than Australia, is the UK. This has allowed the interest rate differential between the GBP and the AUD to grow, making the GBP more attractive. The cross rate remains relatively stable, despite this, although todays RBA decision may cause some temporary flux.

Current Level: 0.5240 (1.9080)
Resistance: 0.5285 (1.8920)
Support: 0.5190 (1.9270)
Last Weeks Range: 0.5200-0.5240 (1.9230-1.9080)

The RBA meets today to determine interest rates and monetary policy. The pause in rate rises may well be short-lived, as inflationary pressures force the Central Banks to act. The RBA is caught between ‘a rock and a hard place’ with extreme political pressure, to leave rates unchanged, while inflation forces action. The reluctance to act may result in mixed messages, in the narrative, but the action will make the banks position clear. The AUD will trade around 0.6650, prior to the decision later today.

Current Level: 0.6645
Resistance: 0.6690
Support: 0.6580
Last Weeks Range: 0.6600-0.6640