Josh Gilbert, market analyst at eToro, shares his three things to watch in Australia in the coming days.
1. RBA Bullock speech
On Tuesday, we will hear from the RBA’s Michelle Bullock in what is likely to be one of the last times we hear from the governor in 2023. Given the current 2024 outlook, this will be a key speech for investors to watch.
The RBA’s decision to keep rates on hold last week was no surprise but the accompanying dovish statement was, with comments pointing towards progress on inflation and a peak in weak growth.
This was a contrast to what we had heard from Michele Bullock just weeks prior, with hawkish rhetoric pointing towards risks on the inflation front. It will be interesting to see what side of the fence she sits on next week, as any dovish tones will undoubtedly excite the market and lift expectations that we have seen the end of the RBA’s hiking cycle.
With the next RBA rate call scheduled for the start of February, there will be plenty of speculation on the next rate call either way, given there’ll be plenty of economic data trickling in post-Christmas.
2. Unemployment rate
Data points in recent weeks have moved in the right direction for the RBA but employment is one key area that continues to show resilience.
The unemployment rate was 3.7% in October with strong employment growth. This continued tightness has affected wages throughout 2023 and it was evident in the wage price index released for the September quarter, rising by 1.3% – the fastest quarterly rise on record.
In a sign of what might be ahead for the unemployment rate, job advertisements fell by 5% in October and sat at 19.9% lower year-on-year, according to data from Seek.
Falling job ads mean less demand for hiring as we head into the new year, which is a firm sign that we may see the unemployment rate rise next week. This, in turn, will further stoke the belief that the RBA’s current hiking cycle is at its end as we head into the new year.
3. Fed interest rate decision
Thursday’s US federal rate decision may be something of a nothing event, with it widely expected the Federal Reserve will keep rates on hold at 5.25% to 5.5%.
If this does wind up being the case, this would then shift the focus towards the Fed’s statement and chair Jerome Powell’s Press Conference.
Markets believe we have seen the end of the Fed’s hiking campaign with pricing for rate cuts as early as March next year.
Although the Federal Reserve has softened its language in recent months regarding further hikes, Jerome Powell has done his best to push back on the expectation of cuts in the first half of 2024.
Before the decision next week, the Fed will receive the latest CPI release and if we see further progress on inflation, Jerome Powell will then have the undesirable duty of keeping markets in check.