Last week saw market participants digest a wave of central bank commentary as several FED members delivered speeches providing their own views on monetary policy, inflation, and tapering. The US Dollar was lifted higher by the rally in treasury yields which saw USD/JPY briefly test the 112.00 level. EUR/USD slumped below 1.1600 before paring the losses towards the end of the week as financiers and investors looked towards a new month and quarter. Equities ended the month of September in the red with the SPX and Dow Jones snapping a 7-month win streak.
Markets in Asia began the week mostly lower as participants reacted to the downbeat tone observed on Wall Street in the week prior. The Nikkei 225 was pressured and closed lower by 1% with losses spearheaded in exporter names whilst focus also turned to PM Kishida’s confirmation in parliament. On the other hand, the ASX 200 led the way higher by finishing up by over 1%. The index remained unfazed by the absence of key market participants and was propped up by gains in the financial sector.
The week ahead
Looking to the week ahead, traders will await the outcome of central bank meetings taking place this week. The RBA’s policy decision will hold on Tuesday where investors are expecting policy settings to remain unchanged with the Cash Rate Target and 3 – Year Yield Target remaining at 0.1%. The central bank is also unlikely to alter the current purchases of bonds which is current occurring at a pace of 4bln AUD a week. The RBNZ is expected to lift rates this week with OIS pricing in a 100% chance for the OCR to be raised by 25bps to 0.5%. The bank temporarily paused its hawkish stance at the last meeting due to the imposition of level 4 restrictions but since then RBNZ Governor Orr has doubled down on his hawkish rhetoric by outlining that rises in Covid cases alone will not prevent a rate hike.
Oil markets rallied last week, with Brent Crude breaking to its best levels since 2018. The recent appreciation has now brought the year-to-date gain to over 50% as the asset has recovered from the extreme lows witnessed last year. Looking ahead, oil traders will be awaiting the outcome of the upcoming OPEC+ Meetings where participants are expecting OPEC+ to stick to its plan of hiking monthly output by 400k BPD with most delegates suggesting this this meeting is likely to be a smooth affair.
Here is a breakdown of the high impact data releases this week.
All Day OPEC+ JMMC Meetings. Markets to watch: ALL
04:30 RBA Rate Statement. Markets to watch: AUD
15:00 ISM Services PMI. Markets to watch: USD
02:00 Official Cash Rate & RBNZ Rate Statement. Markets to watch: NZD Crosses
13:15 ADP Non-Farm Employment Change. Markets to watch: USD Crosses
17:00 BOC Gov Macklem Speaks. Markets to watch: CAD Crosses
13:30 Employment Change & Unemployment Rate. Markets to watch: CAD Crosses
13:30 Average Hourly Earnings, Non-Farm Employment Change & Unemployment Rate. Markets to watch: USD Crosses
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