Market Drivers; US Session: Investors Closely Follow the RBA Ahead of US CPI

The global financial markets are currently laser-focused on recent decisions and upcoming events that could significantly impact various asset classes. Investors are particularly attentive to the rate decision by the Reserve Bank of Australia (RBA) and the anticipated US Consumer Price Index (CPI) report.
Reserve Bank of Australia (RBA) Decision
The RBA decided to maintain the Official Cash Rate (OCR) at 4.35%, marking the ninth consecutive meeting with no changes to its policy settings. This decision was largely expected by the market. In November 2023, the central bank had raised the benchmark rate by 25 basis points, setting the stage for a cautious approach moving forward.

Key Points from the RBA Monetary Policy Statement:

• Underlying Inflation Remains High: Despite some improvements, inflationary pressures are still a concern.
• Uncertainty in the Outlook: The board acknowledges the uncertain economic outlook, both domestically and internationally.
• Data-Driven Decisions: The RBA emphasizes its commitment to relying on data and evolving risk assessments to guide future decisions.
• Mixed Economic Activity Data: Recent data on economic activity have been inconsistent, with overall performance softer than expected in November.
• Easing Wage Pressures: Wage pressures have eased more than anticipated.
• Restrictive Monetary Policy: The board believes that current monetary policy remains restrictive and effective.
AUD/USD Reaction
In response to the RBA’s decision to extend the pause on rate changes, the Australian Dollar has weakened. The AUD/USD pair is down by 0.87% on the day, trading at 0.6381. This decline reflects market sentiment as investors adjust their positions based on the RBA’s cautious stance.

US Dollar Performance

The US Dollar demonstrated resilience, overcoming initial bearish sentiments to close Monday’s session with gains. Renewed geopolitical tensions and cautious sentiment ahead of the US inflation data release supported the dollar’s performance.

Key Developments to Watch: December 10 Highlights:

• US Dollar Index (DXY): The DXY rose for the second consecutive day, surpassing the 106.00 barrier amid a modest increase in US yields.
• NFIB Business Optimism Index: Scheduled for release, providing insights into the economic outlook.
• Unit Labor Costs: Another critical metric to be reported, reflecting labor market conditions.
• API’s Weekly Crude Oil Inventories: Will offer clues about energy market dynamics.
Currency Pair Movements:
• EUR/USD: The pair pulled back after an unsuccessful attempt to breach the 1.0600 barrier. Germany’s final inflation rate will be closely watched.
• GBP/USD: Traded steadily but faltered just before the key 1.2800 level, with no major data releases expected.
• USD/JPY: Advanced to multi-day highs above the 151.00 mark, driven by dollar gains and rising US yields.
• AUD/USD: Reversed sharply, challenging the 0.6470 zone after dipping below 0.6400 levels, ahead of the RBA meeting.

Commodity and Precious Metal Market

Geopolitical factors have resurfaced, influencing commodity prices:
• WTI Crude Oil: Prices surged to two-day highs near $69.00 per barrel.

• Gold: Central bank buying and expectations of a Federal Reserve rate cut lifted gold prices to two-week highs near $2,680 per troy ounce.

• Silver: Prices advanced to five-week highs above the $32.00 mark per ounce, buoyed by expectations of further Chinese stimulus.

The interplay of central bank policies, geopolitical events, and economic data releases continues to shape the financial landscape. Investors are advised to stay informed and agile, ready to respond to market shifts as new information emerges.

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