07 December 2022
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RBA hikes rates for the 8th consecutive month

By Daniel Richards

In line with expectations, the Reserve Bank of Australia elected to hike the cash rate target by 25bps points yesterday, to reach 3.1%. The RBA has now raised its key interest rate for the 8th consecutive month, amounting to a cumulative 300 bps tightening since the start of the year.  Markets are still pricing in a further 50bps of rate increases going forward. 

There was a sizeable surprise to the upside for German factory orders in October. Real new orders rose 0.8% m/m, materially above the consensus expectations of 0.1%m/m growth. Much of the growth appears to have been driven by large-scale orders, without which new orders would have declined 1.2% on the month. On an annual basis the October figure represents a -3.2% y/y fall in orders. The September value was also revised up materially to -2.9% m/m from -4% m/m. The better-than-expected factory orders data adds to hopes that the Eurozone may be poised for a milder recession than previously anticipated.  

The S&P/CIPS UK construction PMI remained in expansionary territory in November, but only just so. The November index value fell to 50.4 from 53.2 in October, well below consensus expectations of 52. Survey respondents pointed towards higher borrowing costs and declining consumer confidence as drivers curtailing growth in construction activity in the UK.

Th US trade gap widened by USD4bn in October, as the value of imports rose 0.6% while exports declined 0.7%. This left the trade balance bigger at -USD78.2bn in October from -USD74.1bn in September. This reading was better than the -USD80bn consensus forecast. The widening of the trade deficit is now likely to weigh on GDP growth in Q4, after having supported it in Q3.   

Today’s Economic Data and Events

  • 8:30 RBI Repurchase rate: forecast 6.25%
  • 11:00 German Industrial production Oct: forecast -0.6%
  • 16:00 US mortgage applications Dec 2
  • 19:00 Bank of Canada Rate decision: forecast 4.25%

Fixed Income

  • Yields on USTs headed lower across the curve yesterday despite the search for safety seen elsewhere in markets. The 2y dropped 2bps to 4.3664% while the 10y fell 4bps to 3.5314%. With the Fed now in its pre-meeting blackout period there will be little in the way of commentary moving markets until the December FOMC has passed. The next major data point to watch for is the CPI print on the 12th,
  • India’s Reserve Bank is due to hold its MPC meeting this morning, with the likely outcome being a 25bps rate hike from 5.90% to 6.15%. This would mark a slowdown from the previous three 50bps hikes as inflation peaks and the rupee comes under pressure.


  • Haven demand following some gloomy predictions from bank CEOs saw the dollar index reverse its earlier losses against the greenback's basket of peers, with the DXY ending the day up 0.3%.
  • Cable was a notable mover as sterling lost 0.5%, while the EUR lost a more muted 0.2%. Commodity currencies were somewhat mixed but the overall trend was still down as the loonie dropped 0.6% and the AUD 0.2%


  • The exuberance of the past week or so in East Asian markets came off the boil yesterday as the Hang Seng closed down -0.4% (though it remains 6.2% higher than it was a week earlier). The Shanghai Composite closed flat but the Nikkei added 0.2%. Indian markets were down as the Sensex and the Nifty both closed -0.3% lower.
  • Risk-off tone continued in Europe as the major indices all closed lower. The FTSE 100 dropped -0.6% and the DAX -0.7%. In the US, the NASDAQ was the biggest loser as it ended the day -2.0% lower while the Dow Jones dropped -1.0%.
  • Locally, the DFM dropped -0.4% and the ADX -0.6%. Saudi Arabia’s Tadawul ended the session up 0.2%, reversing earlier losses.


  • After starting the day off bid, oil markets took a turn southwards with a sharp intraday reversal in the afternoon. Brent futures ended the day down 4.0% at USD 79.4/b while WTI lost 3.5% to close at USD 74.3/b. These are levels last seen in January.
  • The imposition of a price cap on Russian oil has not prompted any concerns over supply as yet despite reports of tanker backlogs in Turkey, with concerns over a global recession remaining the predominant driver as yet.

Click here for charts and tables

Written By

Daniel Richards Senior Economist

Jeanne Walters Senior Economist

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