Harvest Global Markets :

On December 5, 2023, the Reserve Bank of Australia (RBA) opted to maintain the cash rate at 4.35%, aligning with economists’ predictions. The decision marked a pause in the RBA’s previous rate hike cycle, drawing attention to the subsequent RBA Rate Statement. Notable points from the statement included the absence of significant economic deviations since the November meeting, with the Monthly CPI Indicator indicating a continued moderation in inflation. RBA Board members expressed expectations of limited wage growth and a potentially loosening labor market. Despite consistent medium-term inflation expectations with the target, persistent service price inflation and uncertainties about the Chinese economic outlook and overseas conflicts posed concerns.

The market responded dynamically to the RBA’s decision, with the AUD/USD experiencing fluctuations. Prior to the announcement, the currency pair rose to $0.66217 but later dropped to $0.65961. Following the decision and Rate Statement, the Aussie dollar initially climbed to $0.66062 before subsequently falling to $0.65713. As of the latest update, the Australian dollar had depreciated by 0.66% to $0.65758.

Looking ahead, the focus shifted to European service PMIs, particularly the potential impact of an upward revision to the Eurozone services PMI on mitigating fears of an extended economic recession. Positive numbers could also support the European Central Bank’s intentions to maintain higher interest rates. However, the spotlight later turned to key indicators in the United States, namely the ISM Non-Manufacturing PMI and JOLTs Job Openings.

The global markets awaited these U.S. indicators, with an unexpected decrease in the ISM Non-Manufacturing PMI and a more substantial than anticipated decline in job openings potentially fueling expectations of a Federal Reserve rate cut in Q1 2024. Investors were advised to carefully consider the sub-components of these reports. Conversely, contrasting results, such as increases in ISM prices and employment, could signal a rise in demand-driven inflation. A higher JOLTs quit rate would reflect confidence in the U.S. economy, supporting wage growth, consumption, and demand-driven inflation.