Bitcoin Avoids Sharp Moves. Unlikely for Long

Bitcoin continues to move strictly to the right, with decreasing intraday volatility and passively closing slightly below its 50-day moving average, which is pointing up. In theory, this is a signal of a medium-term trend change. In practice, however, it may simply be market noise.

AUD/USD Rebounds on Stronger Inflation Release

The Reserve Bank of Australia meets on Tuesday and is expected to maintain the cash rate at 4.10%. The past two rate meetings have been close calls and that could be the case at Tuesday’s meeting. The money markets, however, are squarely leaning towards a pause, with only a 14% chance of a hike, according to the ASX RBA Rate Tracker.

Sunset Market Commentary

European CPI numbers and Q2 GDP growth were the main (and only) dish for today. The economy expanded more-than-expected 0.3% in the previous quarter after stagnating in Q1. Compared to the same period last year, GDP is 0.6% larger. It’s only the flash reading, so changes may still take place.

Will BoE Go Back to 25bps Interest Rate Increments?

With inflation in the UK slowing by more than expected in June and the July PMIs revealing that UK business activity continues to weaken, investors have become increasingly convinced that the Bank of England may need to slow down the pace of its future hikes and return to 25bps increments. The Bank meets on Thursday at 11:00 GMT and it will be interesting to see whether this will be the case and how the overall outcome could affect the British pound.

Where Crude Oil Prices Could Pop

WTI broke above $81 on Monday and is making new multi-month highs after six weeks of strength. Last Monday, the price bounced sharply off its 200-day moving average, confirming the break of a downtrend that has been in place for more than a year.

Eurozone Inflation is a Persistent Challenge

According to Eurostat’s preliminary estimate, eurozone inflation slowed to 5.3% year-on-year in July. This is the lowest rate since January 2022 and aligns with analysts’ expectations.

Aussie Trades on Backfoot Following RBA's Decision

The dollar ekes out a small gain while the Aussie trades on the backfoot following the RBA’s decision to hold steady. Japan’s yen is still in the defensive though losses remain contained. Yet another stronger-than-expected PBOC fixing of China’s yuan doesn’t result in follow-up gains after a strong July month for the currency.

A "Data-Dependent" RBA Does Not Bode Well for Aussie Bulls

RBA has decided to hold on to its official policy cash rate at 4.1% for the second consecutive month; data from the ASX 30-day interbank cash rate futures as of 31 July 2023 has indicated a patty pricing of only a 14% chance of a 25-bps hike, down significantly from a 41% chance being priced a week ago.

RBA Board Pauses in August – Rates Now Likely on Hold for Extended Period

The Board now believes that the recent data is consistent with achieving the inflation target. It also expresses uncertainty around the link between tight labour markets and inflation. It will be another close call in September but thereafter we expect the weak economy to dominate policy. The first rate cut is not likely until the September quarter 2024.

Australian Dollar Takes a Tumble as RBA Pauses

The Australian dollar continues to swing wildly this week. In Tuesday’s European session, AUD/USD is trading at 0.6630, down 1.30%. On Monday, AUD/USD jumped 1% higher.