5thDecember 2023
Tuesday
On December 5, 2023, Australiaand the United States are set to make significant economic disclosures.Australia will announce its Cash Rate, while the United States will releaseinformation regarding the ISM Services PMI and JOLTS Job Openings.AUD – Cash Rate
Short-term interest rates are the primary determinant in the valuation of currencies. Traders often consider other indicators mainly to forecast future changes in these rates.
In November, the Reserve Bank of Australia raised its cash rate to 4.35%, marking the 13th increase since May 2022. This decision, influenced by sustained inflation primarily due to escalating service costs, has elevated borrowing rates to their highest since January 2011. The CPI inflation is anticipated to hover around 3.5% by the end of 2024 and is expected to reach the higher end of the 2-3% target range by the end of 2025. The new governor, Michelle Bullock, highlighted that any future rate hikes would be based on ongoing data analysis and risk evaluation, with a focus on closely observing the global economy, domestic demand, as well as the inflation and labor market trends. Furthermore, the interest rate for Exchange Settlement balances has been increased to 4.25%.
TL;DR
Aspect
Detail
1 Cash Rate as of November
4.35%
2 Number of Increases since May 2022
13
3 Reason for Increase
Sustained inflation, primarily due to escalating service costs
4 Current Borrowing Rate Status
Highest since January 2011
5 Projected CPI Inflation End of 2024
Around 3.5%
6 Projected Inflation End of 2025
Expected to reach the higher end of the 2-3% target range
7 New Governor
Michelle Bullock
8 Future Rate Hike Criteria
Based on ongoing data analysis and risk evaluation; focused on global economy, domestic demand, inflation, and labor market trends
9 Interest Rate for Exchange Settlement Balances
4.25%
The forecast suggests that the RBARate will remain unchanged at 4.35%, consistent with the previous announcement.
The next announcement for the Cash Rate is set to be made on December 5, 2023, at 3:30 AM GMT.
The last time, the Australian Cash Rate was announced on the 7th of November, 2023. You may find the market reactiongraph(AUDJPY M5) below:
AUD - RBA Rate Statement
The announcement is a key instrument used by the RBA Reserve Bank Board to engage with investors regarding monetary policy. It includes the results of their decisions on interest rates and insights into the economic factors that shaped these decisions. Crucially, it provides an analysis of the economic forecast and hints at the direction of future policy decisions.
The statement regarding the RBARate is scheduled to be issued on December 5, 2023, at 3:30 AM GMT.
USD - ISMServices PMI
This serves as a primary indicator of economic health. Businesses are quick to respond to market conditions, and their purchasing managers often have the most immediate and pertinent insights into the company's perspective on the economy.
In October 2023, the United States' ISM Services PMI saw a decrease to 51.8, a five-month low, falling notably short of the anticipated 53. This decline was reflected in a slower rise in business activity/production (54.1 compared to 58.8) and employment (50.2 as opposed to 53.4). Both inventories (49.5 versus 54.2) and new export orders (48.8 against 63.7) experienced a contraction. On a brighter note, there was an acceleration in new orders (55.5 against 51.8), and a slight moderation in price hikes (58.6 compared to 58.9). Furthermore, supplier deliveries improved, indicating faster performance at 47.5, a decrease from 50.4. Business sentiment currently shows a mix, with some firms optimistic about stability, while others raise concerns over inflation, interest rates, and geopolitical issues. Challenges related to labor, such as rising costs and shortages, continue to be significant in the economic environment.
TL;DR
Aspect
October 2023 Data
Comparison/Notes
1 ISM Services PMI
51.8
Five-month low; below the anticipated 53
2 Business Activity/Production
54.1
Slower rise compared to 58.8
3 Employment
50.2
Decreased from 53.4
4 Inventories
49.5
Contraction from 54.2
5 New Export Orders
48.8
Contraction; down from 63.7
6 New Orders
55.5
Acceleration compared to 51.8
7 Prices
58.6
Slight moderation from 58.9
8 Supplier Deliveries
47.5
Improved performance; down from 50.4
9 Business Sentiment
Mixed
Optimism about stability vs concerns over inflation, interest rates, and geopolitical issues
10 Challenges
Labor-related issues
Rising costs and shortages remain significant
The latest forecast for the ISMServices Purchasing Managers' Index (PMI) shows a slight decrease, with predictions placing it at 51.5. This represents a marginal drop from the previous figure of 51.8, suggesting a subtle slowdown in the services sector's growth.
The upcoming ISM Services PMI announcement is scheduled for December 5, 2023, at 3:00 PM GMT.
The last time, the US ISM Services PMIwas announced on the 3rd of November, 2023. You may find the marketreaction graph (GBPUSD M5) below:USD - JOLTS JobOpenings
Traders value this data highlyeven though it is released with a delay, as it has the potential tosignificantly impact the market. The number of job openings is considered a keyindicator of the overall employment landscape, highlighting the importance ofthis information for market participants.
In September 2023, the number ofjob openings in the United States increased by 56,000 from the previous month,reaching a four-month peak of 9.55 million. This rise surpassed marketforecasts, which had projected 9.25 million job openings. The increase wasparticularly notable in the accommodation and food services sector, which added141,000 jobs, and the arts, entertainment, and recreation sector, which grew by39,000 jobs. However, there were decreases in job openings in other services,losing 124,000 positions, the federal government, which shed 43,000 jobs, andthe information sector, which saw a reduction of 41,000 jobs.
TL;DR
Aspect
Detail
Comparison/Context
1 Total Job Openings (September 2023)
9.55 million
A four-month peak; an increase of 56,000 from the previous month
2 Market Forecast
Had projected 9.25 million
Actual openings surpassed forecasts
3 Notable Increases
Accommodation and Food Services: Added 141,000 jobs - Arts, Entertainment, and Recreation: Grew by 39,000 jobs
Significant sectoral job growth
4 Notable Decreases
Other Services: Lost 124,000 positions - Federal Government: Shed 43,000 jobs - Information Sector: Reduction of 41,000 jobs
Contrasting sectoral job reductions
The most recent forecast for the JobOpenings and Labor Turnover Survey (JOLTS) anticipates a slight decrease injob openings, with the figure projected to be around 9.4 million. Thismarks a minor decline from the previous figure of 9.553 million,indicating a subtle shift in the job market dynamics.
The upcoming JOLTS JobOpenings report is scheduled to be published on December 5, 2023, at3:00 PM GMT.
The last time, the US JOLTS Job Openings wasannounced on the 1st of November, 2023. You may find the marketreaction graph (GBPUSD M5) below:
