The Reserve Bank of Australia kept the cash rate at 3.6% as expected but delivered a distinctly hawkish tone. Policymakers warned that inflation risks have “tilted to the upside”, with Governor Bullock signalling the board remains dissatisfied with current price pressures. February’s meeting now hinges on the trajectory of inflation, placing extra weight on the January 26 quarterly CPI release.
Bond markets reacted swiftly: Australia’s 3-year yield climbed to 4.15%, while the 1-year sits at 3.97%. Bloomberg data shows a 25bp hike now fully priced by June, compared with November before the meeting. AUD/USD gained 0.4%, although further upside may be limited given a hawkish outcome has been priced for weeks.
The ASX 200 fell 0.45% in its worst session in six days, with all 11 sectors trading lower following the RBA’s stance.
View related analysis:
- ASX 200 Market Outlook: Can Santa’s Rally Help the ASX This December?
- S&P 500 Seasonality: How Santa's Rally Across Wall Street Stacks Up
- ASX 200 Market Outlook: Healthcare Rebound Mixed for CSL, PME, SHL
- ASX 200 Market Outlook: Santa’s Rally Arrives Early for Materials
ASX 200 Slides as Hawkish RBA Weighs on All Sectors
ASX 200 Market Snapshot
- A 3-bar evening star reversal formed on the ASX 200 daily cash chart.
- Information Technology (XIJ), Health Care (XHJ) and Energy (XEJ) led all 11 sectors lower.
- Materials (XMJ) pulled back from its record high for a second straight session.
- Market breadth weakened: 66 stocks advanced, 123 declined and 11 finished unchanged.
Chart analysis by Matt Simpson - source: ASX, LSEG
ASX 200 Futures (SPI 200) Sector Analysis
The daily chart shows bearish momentum returning around the 200-day EMA and monthly pivot. Daily volumes remain below the 20-day average, although they are slightly higher than yesterday’s. While price holds beneath last week’s high, the bias still favours a move towards 8500.
Take note that the FOMC meeting could influence the ASX 200 via Wall Street’s reaction. I suspect the Fed will lean slightly hawkish, which may lift the US dollar and weigh on US indices. That said, the ASX also has a tendency to firm into the new year from around mid-December.
Chart analysis by Matt Simpson - Source: TradingView, ASX SPI 200 Index Futures
