The Aussie dollar depreciated in reaction to the RBA's decision to raise its cash rate target by just 25bp, although most analysts expected it to hike by twice as much, after four straight 50bp moves. The Bank said it expects to keep pushing interest rates higher, while tipping hat to the speed of previously deployed tightening and the deteriorating global conditions. Failure to tighten monetary conditions by the expected increment put a firm bid into ACGBs, while market pricing surrounding the terminal rate shifted lower.
- AUD/USD bounced off its post-RBA lows ($0.6451) amid apparent profit-taking, but the recovery proved short-lived. The rate now hovers just above its worst levels of the day. The kiwi retreated on trans-Tasman contagion, becoming the second-worst G10 performer.
- Selling pressure hit AUD/NZD in sync with a sharp move lower in Australia/New Zealand 2-year swap spread. The RBNZ is broadly expected to raise its key policy rate by 50bp at its interim monetary policy review tomorrow.
- North Korea fired an intermediate-range ballistic missile (IRBM) over Japan, triggering an alert system which issued "duck-and-cover" warnings in some less populated areas for the first time since 2017. The yen posted a negligible uptick, but USD/JPY appreciated as the session progressed, approaching the Y145.00 mark, seen as the threshold of heightened intervention risk.
- Focus turns to U.S. factory orders & final durable goods orders, as well as comments from Fed's Logan, Williams, Mester, Jefferson & Daly and ECB's Lagarde, de Cos & Centeno.