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On February 3rd, DBS Bank senior economist Radhika Rao stated in a report that the Indian market is poised for a rebound following the announcement of the US-India trade agreement. She noted that high tariffs were a major factor dragging down market sentiment over the past quarter, while the agreement is "undoubtedly a significant boon to the real economy and exports," and will also boost financial market sentiment. Rao added that textiles, gems and jewelry, engineered products, leather, and chemical products are expected to be the main beneficiaries. She wrote that considering the punitive tariffs previously imposed for purchasing Russian oil, the reduction from 50% to 18% effectively brings Indias tariff levels close to those of most Southeast Asian countries.The Reserve Bank of Australia will release its interest rate decision and monetary policy statement in ten minutes.The U.S. House Rules Committee has advanced the government funding bill, clearing the way for a full vote as early as tomorrow.February 3 – UOB economists Enrico Tanuwidjaja and Vincentius Ming Shen noted in a report that Indonesias trade surplus outlook faces increasing risks due to slowing economic growth and escalating trade tensions, potentially causing demand pent up last year to gradually subside at the beginning of 2026. They believe that while the Comprehensive Economic Partnership Agreement (CEPA) with the EU provides some diversification support, broader trade partnerships and downstream industrial expansion in more sectors are crucial to maintaining the surplus momentum. UOB projects that Indonesias trade surplus will narrow this year from US$41 billion in 2025 to approximately US$35 billion due to slower export growth and continued capital goods imports.February 3rd, Futures News: Recently, crude oil prices have fluctuated significantly. After the escalation of tensions in the Middle East led to a price increase, the US signaled a willingness to negotiate, and a potential concession from a Middle Eastern country further de-escalated the situation, resulting in a noticeable drop in oil prices. Zhuochuang Information predicts that continued attention will be paid to the US-Iran peace talks, with the two sides likely to meet on Friday. Until then, oil prices are expected to fluctuate within a narrow range. However, considering the weak fundamentals, oversupply, and significant inventory pressure, a weak market outlook is maintained.

Above 0.68, AUD/USD justifies cautious optimism due to the RBA rate hike and US ISM PMI

Alina Haynes

Sep 06, 2022 15:32

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AUD/USD flourishes on the bull's radar as it retests the intraday low around 0.6820, near 0.6815 at press time, during Tuesday's Asian session with a modestly positive market outlook. The recent appreciation of the Australian dollar could be attributed to hawkish expectations for the Reserve Bank of Australia's (RBA) anticipated fourth rate hike.

 

Whether it's the United Kingdom's energy bill freeze or the People's Bank of China's (PBOC) reduction in the Reserve Requirement Ratio (RRR), not to mention stimulus from Germany/Europe, officials are all engaged in the fight against the recession, which boosted sentiment. The market's reaction to the recent pullback in hawkish Fed bets, notably after Friday's mixed US employment report, is also likely to have benefited AUD/USD purchasers. Reserve Bank of Australia (RBA) rate hike preparations and full markets looked to have taken precedence in recent months.

 

US 10-year Treasury rates increased three basis points to 3.22%, while S&P 500 Futures advanced 0.30 percentage points to 3,933 at the latest.

 

Alternately, the impending Eurozone recession, the probability of higher rate hikes by the US Federal Reserve (Fed) despite recent mixed data, and Sino-American conflicts are weighing on the prices. Notably, the RBA rate hike appears to be well priced in; hence, AUD/USD traders appear to be anticipating a bearish move.

 

Russia's suspension of energy supplies to Europe worsened the situation for the old continent when it joined the other Group of Seven (G7) nations in establishing an oil price cap. Diminished hopes for a US-Iran oil deal and the output decrease by the Organization of the Petroleum Exporting Countries and its allies, especially Russia, added further to the European energy crisis.

 

In addition, the US-China disagreement over the trade agreement and Taiwan deteriorated on Monday when the Biden administration announced its intention to keep the tariffs imposed by the Trump administration for the foreseeable future. Previously, the elimination of these levies suggested that relations would likely improve. In addition, the United States' willingness to sell arms to Taiwan and Taipei's policy of giving visa-free entry to nationals of some friendly countries, including the United States, prompted Beijing to express negative sentiments about US-Taiwan relations and exacerbated tensions.

 

In the future, the RBA's 0.50 percentage point rate boost would not be sufficient to satisfy AUD/USD bulls unless the rate statement appears hawkish. Notwithstanding, a smaller-than-anticipated rate hike or dovish comments from the Australian central bank could prolong the pair's downward trajectory. After that, the ISM Services PMI for August, which is predicted to be 55.5 compared to 56.7 earlier, will be closely observed for further momentum.


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