AUD at Four-Month High after Hawkish RBA Minutes

AUDUSD continued to rise strongly in the Asian and early European trading sessions after hawkish RBA minutes. AUDUSD may experience extra volatility today due to the FOMC minutes at 7 p.m. UTC. Now, the market seems to believe that the U.S. inflation has been beaten, and the regulator may turn dovish. Therefore, AUUDSD may fall sharply if the minutes show that the Fed is still considering more rate hikes.

Aussie Extends Gains on Hawkish RBA Minutes

The Reserve Bank of Australia minutes, released earlier today, provided insights into the rate hike at the November meeting. The markets perceived the increase as a ‘dovish hike’ and the Australian dollar fell sharply in the aftermath of the decision. However, the minutes paint a different view of the hike, stating that it was intended to lower the risk of a “larger monetary policy response”, given stubbornly high inflation and a strong economy.

UK PMIs on the Menu But Political Difficulties Reemerge

Bank of England Governor Bailey got his wish in last week’s inflation report for October. The annual inflation growth rate dropped to a respectable 4.6% from 6.7% in the previous month, and miles away from the November 2022 high of 11.1%. The inflation rate remains elevated, but it is now much closer to levels seen in other developed nations, thus reducing the pressure on the BoE to raise rates again.

The Crypto Market Attracts Capital

Crypto market cap retreated some 0.2% in 24 hours to $1.41 trillion. Bitcoin is up 0.7%, and BNB is up 5.3%, but most altcoins are down.

Canadian Dollar Quiet Ahead of Canadian CPI

Canada’s inflation rate has been dropping and the markets are expecting good news from today’s inflation release. October inflation is expected to have declined to 3.2%, compared to the 3.8% gain in September.  Monthly, CPI is expected to increase to 0.1%, up from -0.1% in September. CPI Trimmed Mean, a key core inflation gauge, is projected to dip to 3.6%, down from 3.7% in September.

Sunset Market Commentary

October inflation data in Canada reported today showed a mixed picture. Headline inflation printed at 0.1% M/M and 3.1% Y/Y (was -0.1% M/M and 3.8% Y/Y in September). The core trimmed (3.5% from 3.7%) and mean (3.6% from 3.9%) measures that are closely watched by the Bank of Canada also eased more or less as expected. However, other details showed a more nuanced picture.

BoE Continues to Push Back Against Market Expectations

The Bank of England used its monetary policy report hearing to once more push back against market expectations on rate cuts next year.

Will Japan's CPI Support a BoJ Easy-Policy Exit Early Next Year?

At their latest monetary policy decision, BoJ policymakers decided to adjust their yield curve control (YCC) framework to allow 10-year Japanese government bond (JGB) yields to rise above 1%. However, they did not ditch the cap. They just redefined it from a rigid ceiling to a reference bound, which means that should officials judge it necessary, they will intervene in the bond market again. And indeed, this is what they did the day just after the decision.

Fed Minutes Confirms Fed Could Follow Through With Additional Tightening

Today's minutes confirmed that the Fed has not closed the door on a final rate hike. While the Fed has made notable progress in curtailing inflation, Chair Powell has stated that the fight against inflation "has a long way to go". This sentiment has been echoed by multiple FOMC members. With the risks in returning inflation to target becoming more balanced, the Fed will take a calculated approach in calibrating its policy stance to a sufficiently restrictive position.

We Don't Expect Big Swings Ahead of US Long Weekend

We don’t expect big swings ahead of the US long weekend (Thanksgiving) suggesting recent corrective tops (bonds/stocks) and bottoms (dollar) to stay out of reach.