Hike rates

RBA expected to hike rates another 50bps to slow inflation

U.S. stock markets climbed 4.26% last week, capping a 9.26% gain in July, the best month since November 2020.

The rally accelerated after last week’s FOMC meeting was less hawkish than expected.

The ASX200 closed 2.26% higher for the week, locking in a 5.74% gain for July, supported by the Wall Street rally and last week’s Australian inflation data was not as higher than expected.

Here are the top five things to watch in the markets this week.

1. RBA poised for third consecutive 50bps interest rate hike

On Tuesday, the RBA is expected to raise the key rate by 50 basis points to 1.85% as part of its pledge to curb inflation.

2. The second quarter US earnings season continues

The second quarter earnings season in the US continues this week with reports from PayPal, Airbnb, Uber and Starbucks.

The number of bookings on Airbnb is expected to increase in the second quarter.

Revenue is expected to climb 56% from a year ago to $2.1 billion, and adjusted EBITDA is expected to double to $592.1 million.

3. The Bank of England will raise rates

The Bank of England is expected to hike rates by 50 basis points at its meeting on Thursday to bring rates down to 1.75%.

Given growing concerns about a recession, there’s a chance of a dovish surprise diluting its commitment to act ‘forcefully’.

4. US Employment Data

Labor market data will be the focus, with the Fed saying last week that the pace of future rate hikes depended on the data.

The market expects payroll growth of +250,000 and a stable unemployment rate of 3.6%.

A lower number would increase the chances that the Fed will slow the pace of rate hikes through the end of the year.

5. Aussie Earnings

Mid-June earnings reporting season kicked off last week and earnings reporting will continue into the next month.

As always, the focus will be on the quantity and quality of earnings and forecasts, with investors looking to see which companies can pass on the effect of rising material and labor costs and which companies will be obliged to wear them.

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