Early Morning Call: AUD falls as RBA keeps rates steady

Indices overview

European equity markets open higher, following mixed session in the US yesterday and in the Asia-Pacific region overnight. The tech sector was the laggard as Nasdaq recorded losses and technology stocks sent Hong Kong’s Hang Seng lower.

RBA rates

In Australia, the Reserve Bank of Australia (RBA) decided to keep its cash rate unchanged at 3.6%. This put an end to a run of 10 straight hikes that took interest rates up by 350-basis points (bp). The bank says it wants additional time to assess the impact of past increases. "The decision to hold interest rates steady this month provides the Board with more time to assess the state of the economy and the outlook, in an environment of considerable uncertainty," said governor Philip Lowe.

The RBA did, however, warn that some further tightening of monetary policy may well be needed. Indeed, inflation slowed to 6.8% in February, but remains way above the central bank's target. Consumer demand is also levelling off, but the labour market remains tight. Housing prices are showing early signs of bottoming out, but the construction sector is struggling due to high costs that have led to the collapse of a few home builders.

In Germany trade surplus narrowed to €16 billion, as exports rose 4% month-on-month (MoM), less than the 4.6% increase in imports. Watch out this morning for more inflation data across the eurozone. At 10 am, the market expects the producer price index (PPI) in the single currency bloc to fall by 0.3% in February MoM, and still up 13.3% year-on-year (YoY).

Macroeconomics

In the US, a couple of macroeconomic indicators are scheduled at 3pm, including JOLT's job openings and factory orders.

Saga has meanwhile swung back to profit. The group this morning reported an underlying profit before tax of £21.5 million, compared to a loss of €6.7m a year ago. Saga says its ocean cruise business continues to see strong demand, and this year's bookings are on track to meet targets.

US retailer Walmart is expected to cut more than 2,000 jobs at five e-commerce warehouses in the US, according to Bloomberg. The layoffs follow a push by Walmart to compete with Amazon online.

Reuters reported at the end of last month that hundreds of Walmart workers were being asked to find jobs within 90 days at other company locations.

Commodities

On the commodity market, oil prices have settled. WTI trades above $80 and Brent above $85. New York cocoa fell from three-year highs yesterday, and New York orange juice gained another 2.2%.