Headlines

* RBA hold rates at 3.6%, says further tightening may be required

* Fed official says inflation is easing but more is needed

* Oil holds biggest gain in a year after shock supply cut by OPEC+

* Asian shares led lower by tech, Wall street closes mixed

FX: USD eased against most of its peers. The DXY is now nearing the halfway point of the 2021 rally at 101.99. The March low sits at 101.91 with next major support  below 101. Losses coincided with dovish US data releases. The US Treasury 2-year yield fell around 8bps and below 4%. And its 200-day SMA. The 10-year yield also dropped below the psychological 3.50% level and 200-day SMA at 3.51%.

EUR dipped below 1.08 before buyers stepped in. The world’s most popular currency pair is trading above 1.09 this morning and eyeing the recent high at 1.0929. GBP is edging up again this morning. The target for bulls is the year-to-date high at 1.2447. USD/JPY rose to a three-week high at 133.75. But the 100-day SMA at 133.71 acted as resistance. USD/CAD is down for a seventh straight day today. Oil and the improved risk mood are helping the loonie. Next support sits at the 200-day SMA at 1.3377. The AUD jumped over 1.5% yesterday, its biggest move since early January. But today’s pause by the RBA has seen it give up some gains.

Stocks: US equities closed mixed in a choppy session. The benchmark S&P 500 added 0.37% as it rose for a fourth day. The Dow outperformed finishing 0.98% higher. The Nasdaq 100 underperformed, losing 0.25%. The tech-heavy index entered had entered a technical bull market into quarter-end last week after advancing 20% from its December low. But losses by Tesla especially (-6.1%) weighed on the index after quarterly deliveries missed expectations.

Asian stocks traded mostly positive, but gains were limited amid higher oil prices and softer US ISM data. The Hang Seng underperformed ahead of tomorrow’s holiday closures across Greater China. Tech weakness hit the index. The ASX 200 managed mild gains on the RBA pause.

US equity futures are flat. European equity futures are also pointing to a better open +0.3%. The Euro Stoxx 50 cash market closed marginally higher.

Gold tapped the early February high at $1959. But this support proved resilient and softer yields saw bugs push prices up to $1980.

Event takeaway – Oil in focus

The surprise cut in oil output by OPEC+ boosted crude prices. The cartel stunned with the announcement of a more than a one million barrel-a-day output cut. This came only a few days after delegates had signalled no intentions to change production limits ahead of the group’s monitoring committee this week.

But most markets have shrugged this shock off as rapidly declining growth expectations go some way to dampening the contagion.  The drop in China PMIs and US ISM also added support to the negative signals about external demand. Higher oil prices may not mean stronger inflation in the current environment, but instead additional slower growth. The alternative is stagflation amid more rate hikes.

Chart of the Day – AUD/USD hits a six-week high

It seems we’ve focused on aussie pairs a lot recently. This time, it’s the major as the RBA kept its policy rate unchanged at 3.6%. This was inline with market pricing though economists were more torn between no move and a 25bp rate hike. This decision came on the back of weakening global growth and the banking sector upheaval. Calming inflation in Australia also helped policymakers. The lagged effects of 10 consecutive rate rises means it will take time to assess the impact on data. The bank did keep the option open to more hikes if wages and the labour market remain tight.

Yesterday saw AUD/USD boosted by the bid in cyclical currencies. This came after prices had been oscillating around the 50% mark of the October rally at 0.6663. This buying pushed the major up towards it 100-day SMA at 0.6798 and out of its recent range. Bulls will want to close above 0.68 to cement the bullish breakout.