RBA leaves rates unchanged as expected

Good morning

Limited data yesterday meant there wasn’t much for the markets to get their teeth into, and as such moves were limited.  GBP outperformed, making gains against other majors with GBPUSD up to 1.3530 at one point and GBPEUR back up to 1.1715, its highest level so far this month.  In the crosses, GBPAUD traded to 1.9145, GBJPY reached 215 helped by a generally weaker Yen, which is trading at 159.23 against the US dollar, in doing so wiping out half of its gains following the US/Japan intervention at the end of July.  I have yet to see a decent explanation for this small bout of GBP strength, but although GBPUSD is back to 1.3500 it has held gains against other majors. 

RBA did leave rates unchanged at 4.35% overnight which saw a kneejerk reaction lower in AUD, but that was short-lived and as Bullock indicated a tightening bias AUD recovered and ended up pretty much at pre-announcement levels.  The vote to hold rates at this meeting was unanimous but the tightening bias comes as RBA note upside risks to inflation that is unlikely to return to target until late 2027.

Oil prices are firmer again with WTI at $83.50 and Brent $89.40 as Middle East issues remain unresolved.  Plenty of talk that Trump now wants to reduce US involvement in the region but with Iran proving to be a tougher nut to crack than he’d hoped it looks as though he won’t be able to walk away claiming any sort of victory.  Indeed, it is reported that Gulf states are resigning themselves to the fact that Iran will end up with greater control of shipping in the Strait of Hormuz than previously, even though Trump has announced the US Navy has cleared all mines and now controls 100% of the waterway. 

It is another day of limited economic data today, but like the weather things hot up later in the week with plenty of data on offer from US and UK from Wednesday onwards including US CPI and UK GDP. 

Have a great day…

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