Off Of Lows Ahead Of RBA

Futures operate a little above their lows ahead of the RBA decision, with the wider drift lower in global core fixed income markets and firmer than expected Chinese manufacturing PMI data applying the pressure to the space thus far. YM -0.5 & XM -5.0 at typing, with the cash ACGB curve also steepening.

• A quick reminder that yesterday’s price action saw a bit of a withdrawal of short positioning in both YM & XM, although the OI swings weren’t huge (levels flagged earlier), with some Ukraine worry leading to a trimming of shorts pre-RBA.
• No changes are expected at today’s RBA meeting, with the lack of upside surprise in last week’s Q4 WPI print and the potential for risks surrounding the Ukraine crisis to be covered providing the possibility of a slightly dovish read when it comes to the first glance of the statement (although we believe that the RBA will not provide meaningful changes to its guidance paragraph, while it is too early to make anything like an accurate projection when it comes to the economic impact of the Russia-Ukraine conflict).
• The IB strip doesn’t price a full 15bp RBA rate hike until July, while there is ~100bp of cumulative tightening priced for ’22. Sell-side consensus looks for the RBA to conduct its first hike in August.