AUD/USD, ASX 200: Watching for Hawkish Overtones in the RBA Minutes

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Summary:

The performance of mainland Chinese stock indices and minutes from the RBA May monetary policy meeting should be on the radar for anyone trading AUD/USD or ASX 200 futures on Tuesday.

The performance of Chinese stock indices and minutes from the Reserve Bank of Australia's (RBA) May monetary policy meeting should be on the radar for anyone trading AUD/USD or ASX 200 futures on Tuesday. With little top tier data or event risk to navigate, they loom as the most likely drivers of Australian financial markets.

AUD/USD pullback offers improved entry levels

Starting with AUD/USD, you can see the pair remains in a solid uptrend dating back to late April, continuing to find bids on dips towards the level. Having struggled above .6700 in recent days, in part due to markets paring Fed rate cut expectations following last Wednesday's US inflation and retail sales reports, it has now pulled back towards the level providing opportunities for bulls and bears depending on how the price interacts.

AUD/USD, ASX 200: Watching for Hawkish Overtones in the RBA Minutes_1

Until the price action suggests otherwise, the near-term bias is bullish given the prevailing trend. With horizontal support located nearby at .6652, traders may consider buying dips towards the level with a stop loss order below targeting the .6710-15 zone, where the price topped out in recent sessions. With near-term price momentum moving to the downside, there may be opportunities for better entry levels.

Above the .6710-15 resistance zone, AUD/USD struggled to break above .6730 earlier this year, making that a topside level to watch. .6870 looms as the next level after that.

Under a scenario where support at .6652 or the prevailing uptrend fails, the bias would switch to selling rallies rather than buying dips. Below the levels mentioned above, .6629 and .6586 are the initial downside targets.

Key catalysts for Australian markets on Tuesday

As for catalysts to watch during Tuesday's session, this short video explains how influential the China stock market open can be on AUD/USD on occasion. With so much focus on measures introduced by Chinese policymakers to support the property sector on Friday, there's every chance this may be a key driver for the Aussie midway through the session.

Adding a layer of complexity, the minutes of the RBA May policy meeting will be released at 11.30am AEST. While they already come across as dated given Australia's Federal budget and key labour market data were released after, traders should be looking out for hawkish overtones. It didn't receive much attention at the time, but during her post meeting press conference, RBA Governor Michele Bullock acknowledged the board discussed either holding or hiking rates, not cutting them. That points to hawkish risks, something that should be supportive of AUD/USD.

Commodity gains remain supportive of ASX upside

Like the Australian dollar, ASX 200 futures may also be influenced by the RBA minutes and China market open.

Mirroring AUD/USD, SPI futures sit in an established uptrend dating back to early May. With the pullback overnight, futures are within touching distance of the trendline, allowing for traders to set longs with decent risk-reward.

AUD/USD, ASX 200: Watching for Hawkish Overtones in the RBA Minutes_2

Until proven otherwise, buying dips is preferred to selling rallies. Traders could establish longs on the open with a stop loss below the trendline for protection. The initial trade target would be 7907, the high hit on Monday. Above, 7936 and 7972 are the key levels to watch.

Should the uptrend give way, traders could sell the break with a stop above the trendline for protection. 7838, 7780 and 7762 are potential downside targets, the latter coinciding with the 200-day moving average.

While near-term momentum is biased lower, continued strength in commodity markets – including iron ore – point to the possibility for dips to be bought.

To stay updated on all economic events of today, please check out our Economic calendar

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Samantha Luan

Economic

Stocks

Investors' appetite for stocks and risk assets shows no sign of waning which, in the absence of any major market-moving economic data or events in Asia on Tuesday, should pave the way for further gains across the continent when trading gets underway.

Monday's global market moves encapsulated the 'FOMO' that seems to be fueling the ongoing risk rally - volatility, the dollar, bond yields and geopolitical uncertainty all rose to varying degrees, yet equities marched higher regardless.

'Fear of missing out' - which some might say isn't all that far removed 'irrational exuberance' - is a powerful force. But it can also be a red flag, especially when long-time market bears join the frenzy.

Morgan Stanley's U.S. equity strategist Mike Wilson has not been the only Wall Street bear over the last couple of years, but he has certainly been one of the most prominent.

On Monday, he and his team raised their base-case, 12-month forecast for the S&P 500 to 5400 points. That's only up around 2% from Friday's close, but 20% higher than their previous forecast of 4500.

Only time will tell if Wilson's about-turn will be an indication that investors' exuberance has become irrational. Right now, however, at least until chipmaker Nvidia's earnings on Wednesday, market bulls are firmly in control.

And Asia is enjoying the ride too. Asian Stocks Eye Best Run Since 2021_1

The MSCI Asia ex-Japan equity index on Monday rose to a two-year high with its seventh consecutive rise, its best run since January last year. Another increase on Tuesday will seal its best run since August-September 2021.

Japan's Nikkei is back above 39,000 points for the first time in over a month, and the dollar is back above 156.00 yen. The dollar is now within one yen, more or less, of where Japanese authorities are widely thought to have conducted yen-buying intervention on May 1.

Intervention seems unlikely right now, but currency traders will not be complacent. The latest Commodity Futures Trading Commission data show that speculators reduced their net short yen positions for a third week, but not by much.

The main event on the Asian and Pacific calendar on Tuesday is the release of the minutes from the Reserve Bank of Australia's May 7 policy meeting.

The RBA quashed market talk at the time of a near-term interest rate hike but also didn't hold out much chance of a cut for months to come. The Aussie dollar has regained its poise since then to climb to a four-month high just above $0.67.

Australian rates markets are not fully pricing in a 25-basis point rate cut until April next year. Asian Stocks Eye Best Run Since 2021_2

Here are key developments that could provide more direction to markets on Tuesday:

- Reserve Bank of Australia meeting minutes

- Australia consumer sentiment (May)

- Indonesia's government presents 2025 economic forecasts to parliament

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Economic

Intuit (INTU), the maker of popular tax software TurboTax and small business accounting platform QuickBooks, recently released its third-quarter earnings report for fiscal year 2024. The report painted a positive picture, exceeding analyst expectations and prompting the company to raise its full-year guidance. Let's delve deeper into the details of the report and explore what it means for Intuit's future.

Highlights of Intuit's Q3 Earnings

Revenue Growth: Intuit reported total revenue of $6.7 billion, representing a 12% increase year-over-year. This growth surpassed analyst estimates of $6.65 billion.

Profitability: Earnings per share (EPS) came in at $9.88, beating analyst expectations of $9.37. This strong performance indicates healthy profitability for the company.

Segment Performance: All of Intuit's major segments experienced growth. The Consumer Group, which includes TurboTax, grew revenue by 9%. The Small Business and Self-Employed Group, encompassing QuickBooks, saw an impressive 18% increase. The Online Ecosystem segment, featuring products like Mint and ProConnect, reported a 19% revenue jump. Even Credit Karma, recently acquired by Intuit, contributed with an 8% revenue increase.

Guidance Raised: Impressed by its Q3 performance, Intuit raised its full-year guidance for fiscal year 2024. The company now expects revenue to land between $16.164 billion and $16.200 billion, representing growth of approximately 13%. This is an upward revision from the previous guidance of 11% to 12% growth.

Reasons Behind Intuit's Success

Several factors contributed to Intuit's strong Q3 performance:

Tax Season Momentum: The tax season typically bolsters Intuit's revenue as individuals and businesses turn to TurboTax and QuickBooks for their tax filing needs.

Growing Demand for Online Solutions: The continued shift towards online financial management solutions is benefiting Intuit. As more people manage their finances and businesses digitally, the demand for platforms like QuickBooks and Mint surges.

Credit Karma Integration: The recent acquisition of Credit Karma brings a large user base to the Intuit ecosystem. Integration of Credit Karma's services with TurboTax has the potential to unlock further growth opportunities.

Focus on Innovation: Intuit continues to invest in innovation, developing new features and functionalities for its products. This commitment to improvement strengthens its market position and attracts new users.

Looking Forward: What's Next for Intuit?

Intuit's strong Q3 performance and raised guidance suggest a company on a positive trajectory. Here are some key areas to watch for in the future:

Impact of Economic Uncertainty: While Intuit's core business is relatively resilient to economic downturns, a significant economic slowdown could impact consumer spending and business investment, potentially affecting Intuit's growth.

Tax Regulatory Changes: Any major changes in tax regulations could necessitate adjustments to Intuit's products and potentially impact its user base.

Competition: The market for financial management software is competitive. Intuit needs to stay ahead of the curve by continuously innovating and differentiating its offerings.

Expansion Opportunities: Exploring new markets and user segments could be a source of future growth for Intuit.

Conclusion: A Positive Outlook for Intuit

Intuit's Q3 earnings report provides strong evidence of the company's continued growth potential. The combination of solid financial performance, a diversified business model, and a focus on innovation positions Intuit well for the future. However, it's important to remain aware of potential challenges like economic headwinds and competition. Overall, for investors seeking exposure to the financial technology sector, Intuit presents itself as a compelling option with a proven track record and promising prospects.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Glendon

Economic

Novavax (NVAX) has been a rollercoaster ride for investors. As a developer of COVID-19 vaccines, it surged during the height of the pandemic but has faced challenges in the post-pandemic era. This article dives into a comprehensive review of NVAX stock, analyzing its current situation, future prospects, and factors to consider before investing.

A Look Back: NVAX's Rise and Fall

Novavax's claim to fame is its Nuvaxovid COVID-19 vaccine. Unlike its mRNA counterparts from Moderna and Pfizer, Nuvaxovid is a protein-based vaccine. While its approval came later than its competitors, initial hopes were high. However, several factors led to NVAX's decline:

Delayed Manufacturing: Production issues hampered Novavax's ability to meet vaccine demands, causing delays in deliveries.

Shifting Landscape: By the time Nuvaxovid entered the market, widespread vaccination with other options had already curbed the pandemic's peak.

Waning Demand: As the urgency of the pandemic subsided, the overall demand for vaccines dropped significantly.

Current Status: A Moderate Rebound

Despite the challenges, NVAX stock has shown signs of a comeback in 2024. Here's a breakdown of its current situation:

Price Performance: Year-to-date, NVAX has outperformed the broader market, with a significant increase compared to the overall industry's slight decline. This suggests renewed investor interest.

Analyst Ratings: The current analyst consensus rating for NVAX is a "Moderate Buy," with a median price target offering some potential upside. However, the range of analyst estimates is wide, indicating some uncertainty about the future.

Financials: NVAX is still in the red, reporting negative earnings per share (EPS) in its latest quarter. However, it beat analyst expectations, which may be a positive sign for future performance.

Why Novavax (NVAX) Stock Price Appreciated 14% on May 20th, 2024

A significant factor contributing to NVAX's stock price surge in May 2024 was the news that activist investor Shah Capital Management decided to withdraw its proxy campaign to remove three board members. This withdrawal came a week after Novavax signed a critical multi-billion dollar deal with pharmaceutical giant Sanofi.

The market reacted positively to these developments for a few reasons:

Reduced Uncertainty: The withdrawal of the proxy fight signaled greater stability within Novavax's leadership, which can be attractive to investors.

Sanofi Partnership Boost: The Sanofi deal provided a much-needed financial boost to Novavax, alleviating concerns about its ability to continue operating ("going concern"). This financial security allows for further investment in research and development.

Increased Market Potential: With Sanofi's vast reach and resources, Novavax's COVID vaccine, Nuvaxovid, could gain access to a wider global audience.

Future Prospects: Beyond COVID-19

NVAX's future hinges on its ability to diversify beyond the COVID-19 vaccine. Here are some key areas to watch:

Booster Shots: The need for booster shots to maintain COVID-19 immunity could provide ongoing revenue for NVAX, especially if Nuvaxovid is included in booster recommendations.

New Vaccine Development: NVAX's pipeline includes vaccines for other respiratory diseases like influenza and RSV. Success in these areas could significantly improve its long-term prospects.

Partnership Potential: Collaborations with other pharmaceutical companies for vaccine development and distribution could be a strategic move for NVAX.

Factors to Consider Before Investing in NVAX

While NVAX's recent upswing is promising, there are still factors to consider before investing:

Market Competition: The COVID-19 vaccine market is crowded, and established players like Moderna and Pfizer have a significant head start.

Regulatory Landscape: Regulatory hurdles for new vaccines and booster approvals could delay NVAX's progress.

Financial Stability: NVAX needs to turn a profit to ensure its long-term sustainability.

Conclusion: A Calculated Bet

Novavax's stock offers a chance for high returns, but it also comes with inherent risks. Investors should carefully weigh the potential for future vaccine demand, NVAX's pipeline progress, and the competitive landscape before making a decision.

For those with a high-risk tolerance and a long-term investment horizon, NVAX could be an interesting option. However, for conservative investors, it might be best to wait for a clearer picture of the company's future before diving in.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Samantha Luan

Economic

Joanne Hsu, who is the director of the University of Michigan's consumer sentiment survey, told CNBC on Friday that she thinks Americans have abandoned plans to save money as they see their financial goals look less attainable and are spending money instead.

“This positive spending is not a reflection of some sort of internalized secret sense of confidence that consumers have,” he explained. “And instead my interpretation is that consumers see that a lot of aspirational goals that we talk about as part of the American Dream—homeownership, paying for college, paying for college for your kids, having a comfortable retirement—with high prices and high interest rates right now, those aspirational goals just feel increasingly out of reach.”

And as a result, consumers have “given up” on saving for those goals, Hsu added, noting that the still-strong labor market allows them to spend now.

The latest reading of the University of Michigan's survey showed sentiment plunged to a six-month low of 67.4 in May from a final reading of 77.2 in April as Americans cited stubbornly high inflation and interest rates, as well as fears that unemployment could rise.

While that report was followed days later by the April consumer price index that showed inflation cooled, it followed three straight months of unexpectedly high prices. Consumer-facing companies have sounded the alarm on the impact that inflation and high rates are having, especially on lower-income shoppers.

To be sure, inflation has come down sharply from the four-decade-high 9% rate in mid 2022 to 3.4% last month. But that means prices are going up less quickly rather than returning to pre-pandemic levels, and the cumulative sticker shock over the last few years still weighs on sentiment.

Meanwhile, gauges for consumer demand have held up. In the first quarter, it continued to drive GDP growth. And despite a weak retail sales report, analysts have noted the overall trend points to continued spending.

For now, consumers expect the strong labor market to persist, giving them enough confidence to spend, but the latest data show some softening, Hsu warned.

“That's possibly an early sign of oncoming weakness for consumers. But as of now, strong incomes are supporting consumer spending,” she added.

But the labor market has also hinted at some cooling off after blockbuster gains earlier this year. The Labor Department's April jobs report came in well below expectations, while the unemployment rate ticked up to 3.9% from 3.8% in March.

Further cooling in the job market could also help nudge the Federal Reserve to start cutting interest rates, giving consumers a reason to be slightly less dour.

Source: Fortune

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Economic

The Bank of England could cut interest rates in the next few months, depending on how rapidly the knock-on impact on wage growth and prices from 2022's surge in inflation eases, Deputy Governor Ben Broadbent said on Monday.

Speaking ahead of his final vote in June as a member of the Monetary Policy Committee, Broadbent cited survey evidence from companies that showed a major driver of inflation pressure - strong wage growth - was likely to dissipate only slowly.

However, Broadbent said there were grounds for optimism as prices were now rising more slowly than wages, helping households recover ground lost when inflation surged.

"The more that's regained, the less ground, relative to some notional 'norm', there is to make up," Broadbent said at a central banking conference hosted by the BoE.

This was why he was content to reduce the persistence of inflation pressures embedded in the BoE's latest forecasts, published earlier this month, he said.

"If things continue to evolve with its forecasts - forecasts that suggest policy will have to become less restrictive at some point - then it's possible Bank Rate could be cut some time over the summer," Broadbent said.

Earlier this month, the BoE's MPC voted 7-2 to keep rates on hold at a 16-year high of 5.25% and Broadbent - one of the seven to vote for unchanged policy - said views varied across the MPC on how much evidence was needed to cut rates.

"The experience of the last two or three years has made people wary. Equally, as I said a moment ago, the behaviour of the economy over the last six months ... is reassuring."

Broadbent, deputy governor for monetary policy since 2014, steps down at the end of June and will be replaced by a former senior finance ministry official, Clare Lombardelli.

Broadbent said it was all the more important that Britain retains its current framework of operational independence for the BoE if shocks to the supply side of Britain's economy become more frequent.

Some politicians in Prime Minister Rishi Sunak's Conservative Party - trailing badly in opinion polls ahead of an election due by January 2025 - criticised the BoE as inflation soared into double digits and its bond sale programme generated heavy losses.

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Economic

Third RBNZ meeting in 2024

The Reserve Bank of New Zealand will announce its interest rate decision on Wednesday at 02:00 GMT with the press conference following one hour later. The market is overwhelmingly expecting no change in the cash rate as it is currently assigning just a 2% probability of a 25bps rate cut.

Similarly to the RBA, the RBNZ remains one of the most hawkish central banks at the current juncture. In the last two meetings, Governor Orr et al repeated the need for maintaining the official cash rate (OCR) at a restrictive level for a sustained period of time to ensure the return of inflation to the 1-3% target range.

Softer data recently...

However, since the April 10 meeting, data has been on the weak side. Business sentiment has been dropping, consumer confidence has taken a turn for the worse, and the unemployment rate reached a 3-year high at 4.3% in the first quarter (Q1) of 2024.

... but inflation remains elevated

Amidst this soft patch, the inflationary pressures are not abating as much as the RBNZ might have hoped for. The Q1 CPI print came below expectations, but remained north of 4%, while both the quarterly labour costs and producer prices indices confirmed the ongoing stickiness in inflation. But the RBNZ might be finally seeing the light at the end of the tunnel as the quarterly survey of forecasters and business leaders has the 2-year inflation rate dropping to 2.33%, not far from the RBNZ’s inflation target midpoint.

Quarterly projections matter

The RBNZ’s overall stance at this meeting might also depend on its quarterly projections. The previous Monetary Policy Statement in February had annual inflation dropping to 2% in the fourth quarter of 2025, and causing a 60bps decrease in the official cash rate, with the first rate cut penciled in for the second quarter of 2025.

A significant revision in the 2025-2026 inflation figures and the watering down of the key statement phrase referring to “the need to keep the OCR at restrictive levels” is necessary in order to add credibility to the market’s expectations. The market is currently pricing in 40bps of easing in 2024 with the first rate cut set for the October 9, 2024 meeting.

Putting everything together...

All-in-all, the RBNZ is expected to remain satisfied with the progression of the domestic economy and its current monetary policy stance. Considering the recent data flow, it looks somewhat difficult for Wednesday’s Monetary Policy Report to confirm the markets’ expectations for considerable easing during 2024, despite some possible downward revisions in the quarterly projections.

Could kiwi/dollar continue to climb?

With the market still digesting the recent mixed US data releases, which are potentially opening the door to a Fed rate cut during the summer, the kiwi has been strengthening against the US dollar.

Interestingly, in the last two RBNZ meetings the kiwi/dollar pair ended the session in the red. In February, there was a buildup of hawkish RBNZ expectations ahead of the meeting, which were not met, while in April the stronger US CPI print helped the dollar outperform its counterparts across the board.

Should the RBNZ decide to moderate its current stance, the kiwi could be on the back foot against the dollar with the pair possibly enjoying higher volatility and retesting the lower boundary of the 0.6060-0.6092 range. On the flip side, an uneventful meeting with the RBNZ maintaining its current balanced stance might cause a more muted market reaction. The next resistance appears to be at the 0.6198 level. Could RBNZ Support Kiwi’s Recent Strength?_2