Morning Futures Briefing

Aussie Declines as RBA Pauses on Rate Hikes

Australian dollar futures fell to 11-month lows Tuesday after the Reserve Bank of Australia (RBA) left its cash rate unchanged at 4.1% for the fourth consecutive month.

The pause on an additional rate hike was widely expected by markets as interest rate futures were pricing in a 93% probability that rates would remain steady just prior to the October RBA meeting.

The October meeting was the first under Governor Michele Bullock after Governor Philip Lowe’s term expired in September.

In the post-meeting statement, the RBA Bank Board said inflation has passed it peak but is still too high and will stay so for some time.

The board did leave open the possibility for additional rate hikes if the economy and prices warrant additional tightening measures.

With headline inflation currently at 6%, RBA board members said they don’t anticipate inflation reaching the central bank’s target level of 2%–3% until late 2025.

RBA officials have to balance bringing inflation back towards their target while avoiding a recession.

Currently, Australia is experiencing below-trend growth with second quarter gross domestic product (GDP) up only 0.4%. Year over year, quarterly GDP is running at 2.1%, down from the previous quarter’s 2.4%.

A slow economic recovery in China, Australia’s largest trading partner, has produced significant headwinds for Australia’s exports due to lower demand for commodities like iron ore and coal.

At the same time, the current high interest rate environment has caused homeowners with expiring fixed-rate mortgages to face significantly higher monthly payments.

Australia’s so-called “mortgage cliff” and high inflation have caused a slowdown in consumer discretionary spending.

This morning, U.S. stock index futures moved lower in the early hours with the S&P 500® (–0.11%), the Nasdaq-100® (–0.21%), the Russell 2000® (–0.15%), and Dow Jones Industrial Average® (–0.01%) all in the red.

In Asia, major indexes closed lower, with the Hang Seng (–0.78%) and the Nikkei (–2.28%) posting losses. The Shanghai was closed for a market holiday.

European trading was mixed by midday with the FTSE (+0.12%) and the CAC (+0.11%) higher, but the DAX (–0.16%) lower.

Futures on the move

Japanese yen futures (/6JZ23) closed higher on Tuesday (+0.57%) after a volatile trading session in which the yen fell to its lowest levels in over a year following the release of the U.S. Job Openings and Labor Turnover Survey (JOLTS), which came in better than expected at 9.61 million. However, the sell-off was short lived as market participants considered whether the Bank of Japan might have moved in to support the yen once it moved to 150 yen per U.S. dollar.

10-year Treasury futures (/ZN23) closed well into the red on Tuesday (–0.64%) as 10-year Treasury yields moved above 4.8% to their highest levels since 2007. Hawkish comments from Cleveland Fed President Loretta Mester favoring additional rate hikes if the current economic situation holds joined the surprise JOLTS number in helping spark the sell-off in Treasuries.  

Sugar futures (/SBH24) ended yesterday’s trading session at one-month lows (–2.58%). The recent retreat in crude oil prices from one-year highs and data showing Brazil’s sugar exports rose by 6% year over year in September helped fan bearish sentiment for sugar prices on Tuesday.   

Major economic reports and news items that could potentially impact specific futures markets:


  • Mortgage Bankers Association’s Weekly Applications Survey (interest rate futures)
  • ADP® National Employment Report for September (interest rate, stock index, currency, gold futures)
  • S&P Global US Services PMI for September (interest rate and stock index futures)
  • ISM Services PMI® for September (interest rate and stock index futures)
  • Factory orders for August (interest rate futures)
  • Energy Information Administration’s weekly energy stocks report (crude oil, gasoline, and heating oil futures)

Treasury Auctions

  • 17-week Treasury bills

Federal Reserve speakers

Federal Reserve presidents Jeffrey Schmid (Kansas City), Austan Goolsbee (Chicago), and Governor Michelle Bowman are scheduled to speak today.


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