Upbeat sentiment could shift amidst major central bank decisions

Wall Street finished Monday’s session in the green. US Treasury yields edged higher as investors await the Federal Reserve’s monetary policy decision, with the 10-year note benchmark up at 4.328%. Consequently, the Greenback advances 0.13%, as measured by the US Dollar Index (DXY) at 103.58.

On Monday, the US economic docket was light, with the release of the National Association of Home Builders (NAHB) Market Index for February, which improved the most since July 2023, rising by 51, up from 48 in February. The NAHG Chairman Carl Harris noted “Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year.”

Aside from this, the day's main theme is the RBA’s decision. Market players estimate the central bank would keep rates unchanged thought, there are different opinions amongst economists. Some expect the RBA will lower rates in November, while others estimate the first cut will be in September.

Given the backdrop of the Aussie economy printing mixed figures on inflation, and growth slowed to 1.5% in Q4 2023 from 2.1%, that has opened the door for easing policy. Testifying before the Australian Parliament last month, Bullock said that “inflation is being persistent, particularly in services. But it is coming down.”

ANZ Bank analysts estimate the RBA would keep a “mild tightening bias, with no change in rates. While the January labor force survey came in weak, we think the RBA (like us) is expecting payback in the February data.”