This week started tentatively after a holiday-shortened London and Asia week, followed by limited price action ahead of the Federal Reserve meeting. The week was dominated by central bank meetings. The Federal Reserve meeting was more or less as expected which meant the USD sold off heavily after the meeting on an expected ‘buy the rumour, sell the fact’ response. The RBA also met and showed their concerns with rising inflation by hiking more than expected lifting the AUD. The BoE also took a hammer on the GBP and, despite hiking rates, they revised growth lower for the UK to negative for 2023 which sank the GBP.
Other key events from the past week
- AUD: Hawkish RBA shift, May 03: The RBA responded to rising inflation by hiking rates by 25bps vs the 15bps expected. They also projected more rate hikes to come opening up the potential for more AUDCAD gains.
- USD: Fed hikes 50bps, May 04: There was a ‘buy the rumour, sell the fact’ response as Jerome Powell only did what markets were expecting. The Fed hiked by 50bps and announced a 3-month phase in for the balance sheet before monthly caps of 60bln and 35bln are met. See here a full rundown running up to the event.
- GBP: July rate hike ahead? May 03: Ahead of the BoE we were looking for potential EURGBP gains into the BoE meeting’. At the meeting the BoE hiked rates but sent the EURGBP soaring by revising growth down. The BoE may pause their rate hiking cycle in the summer which is one reason the GBP sold off.
Key events for the coming week
- USD: US inflation, May 11: The Fed’s aggressive rate hike cycle this year is to control surging inflation. Will inflation data finally show signs of peaking this week? Watch out for a big miss here in the inflation print to potentially encourage USD sellers.
- Seasonal trades: Netflix bounce? Netflix stocks fell heavily in April on the surprise drop in subscribers. However, the seasonals are strong for the stock into the summer.
- AUD: RBA Bullock Speech? May 13: RBA’s Deputy Governor Bullock speaks next week on Friday. Will she indicate any further reasons for AUD strength after the RBA’s hawkish tilt last week?