We're happy to share Dominik Podlaski's, analyst at Bitget views on the RBA decision, British pound, the US GDP and earnings.
Since the beginning of October we have had some relief at the global market, although it didn’t change the looming threat of recession. In my opinion, Australian CPI already peaked in October, so I expect it to lower down to 6.8%. On the other hand, I believe it won’t change the strict attitude of the RBA.
15th of December EBC followed FED hawkish approach. Klaas Knot, member of EBC from Denmark, declared the raise of interest rates by 50 points in February and March. The continuation of monetary policy tightening in Q2 is also probable. RBA governor Philip Lowe highlighted multiple times their main goal – “… target for monetary policy in Australia is to achieve an inflation rate of 2–3 per cent…”
Therefore, in my opinion RBA will follow the USA and the EU in this case and we can expect a raise by half a percentage point. On top of that, I expect the following RBA meetings to have similar results.
(Source: Reserve Bank of Australia (rba.gov.au)).
This PMI may give GBP slight spike, especially if we will have reading over 50, what could mean major trend reversal. Right now, GBP it’s regaining some of its strength. Unfortunately, in the long term it won’t matter, as U.K. economy may be severely hit by recession, as economists predict. Goldman Sachs forecast a 1.2% contraction in U.K. real GDP over 2023, while other major countries may expect small (but still) expansion. Therefore I perceive incoming weeks as calm before the storm for GBP, as in my scenario it will surely follow the U.K. shattered economy.
(Source: GDP - International Comparisons: Key Economic Indicators - House of Commons Library (parliament.uk))
In my opinion, we will see higher GDP than expected 2% - in Q3 and Q4 revisions we’ve seen stronger economic momentum than expected. Despite of this rather positive surprise it will still on the decreasing trend. Therefore, I expect safe haven assets, like gold, silver and platinum, to thrive. We may also see higher demand for Government Bonds, although the hawkish attitude of FED may lower the amount of investors looking for them. Higher than expected print may also be impulse for DXY to have a relief bounce, but I’m afraid it will still remain in the downtrend.
(Source: Economic Forecast for the US Economy (conference-board.org))
FED won’t consider changing their plans after the announcement of GDP, as in this case even the good news for 2022 won’t be satisfying with the terrible GDP forecasts for 2023. Additionally, the GDP measurement is inflated by CPI and its lagging indicator, while FEDs decisions will have an effect in the near future. Therefore, in my honest opinion, the FED will remain strictly hawkish regardless of the GDP reading.
Dark clouds gathered over market giants. Huge rounds of redundancies by Microsoft, Google, Amazon measured in thousands of employees raised many questions about their status. Therefore I don’t expect the earnings data to be impressive, but I wouldn’t be surprised if none of them actually witnessed shrinking revenue. Despite what the audience may be thinking in my opinion it’s not a sign of weakness, but an adaptation. In particular, they will need to do some positive PR after the redundancies and slowed down growth.
During times of market despair strongest should make bold moves instead of counting on stable growth, and that’s what we can expect from them in the incoming weeks. Microsoft just’ve announced multibillion dollar investments with OpenAI – creator of ChatGPT. Therefore I expect nothing less from other giants but fireworks as well.
(Source: Microsoft and OpenAI extend partnership - The Official Microsoft Blog)
