Early Morning Call: AUD/USD shows small upward move as RBA raises cash rate to 3.1%

Equity market overview

US equity markets fell yesterday as the dollar rose following stronger-than-expected ISM services data.

In the Asia-Pacific region the session was mixed, with the Nikkei rising and ASX 200 losing ground. European indices opened lower.

As expected, the Reserve Bank of Australia (RBA) raised the cash rate by 25 basis points (bp) to 3.1%, a level not seen since November 2012. This decision marked the bank's eighth straight rate hike since it started raising rates in April. It's now raised rates a total of three full percentage points. This was the bank's final decision of the year.

In a statement, RBA governor, Philip Lowe said "The Board expects to increase interest rates further over the period ahead, but it is not on a pre-set course", adding that "the size and timing of future interest rate increases will continue to be determined by the incoming data and the Board's assessment of the outlook for inflation and the labour market."

The British Retail Consortium (BRC) released its sales data overnight for November which has come as a surprise, beating the previous release. But there was also a warning. BRC retail sales monitor said retail sales in the United Kingdom jumped 4.1% on a like-for-like basis in November year-on-year (YoY), accelerating from a 1.2% rise the previous month.

But Helen Dickinson, chief executive at the British Retail Consortium, warned that "Sales picked up as Black Friday discounting marked the beginning of the festive shopping season. Also, sales growth remained far below current inflation, suggesting volumes continued to be down on last year."

This 4.1% increase was the highest since January, but less than half the pace of UK inflation which surged to a four-decade high of 11.1% in October.

Elsewhere on the equity market, Ashtead published a rise in profit and revenue for the first quarter (Q1) of its exercise, and now expects full-year (FY) results to be ahead of their previous expectations.

UK pub operator Marston's PLC posted lower-than-expected annual profit, but said sales were encouraging since the start of the current fiscal year.

Forex

Currency traders await US trade balance at 1.30pm. US trade deficit is expected to widen to $80 billion in October. In September, the deficit reached $73.3bn.

The US dollar strengthened yesterday afternoon as the ISM services PMI unexpectedly rose to 56.5 in November, after 54.4 the previous month. Economists had anticipated a decline to 53.3. As the dollar rose, oil, precious and base metals retreated.

The FT reported this morning that the UK Treasury is finalising plans for a package of sweeping rules to regulate the cryptocurrency industry, including limits on foreign companies selling into the UK, provisions for how to deal with the collapse of companies and restrictions on the advertising of products.

Ministers will shortly launch a consultation on the new regulatory regime, after the implosion of FTX injected fresh urgency into the government's promise to impose order on finance's "wild west".