The RBA left rates unchanged, extending the pause in interest rate hikes and bowing to political pressure. The recent inflation number, released last week was much better than expected, plunging from 7% to 6%! This allowed the opportunity for the RBA to extend the pause and leave interest rates unchanged, for another month. The AUD went south very fast, falling from above 0.6700, right down to 0.6600. Interest rate differentials matter, and Australian interest rates are trading at a heavy discount to major Western trading partners, adding to the downward pressure on the currency. The malaise was accentuated, with tumbling commodity prices, as manufacturing demand continues to crash in Europe. German Manufacturing PMI data has collapsed to 38.8 for July, deep into contraction territory, with conditions of suggested German de-industrialisation feared. European inflation remains stubbornly high, as does Australia, while their respective Central Banks are not showing the necessary commitment to the battle.
In the US, the first of the major labour market reports was released overnight. The Jolts Job Openings came in lower than expected, not good news for the economy, but the easing labour market is what the Fed is looking for. Attention now turns to the ADP and Challenger Jobs reports, to confirm easing of conditions, in the labour markets. US Manufacturing still remains in contraction mode, with both the ISM and Manufacturing PMI numbers coming in under 50. The US 10-year bond yields popped back above 4%, supporting the US Dollar, pushing the EUR below 1.1000, while the GBP slipped to 1.2740. Markets are looking ahead to the Bank of England rate decision and the US Non-Farm Payrolls number.