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RBA delivers hawkish pause, Zuckerberg takes on Musk

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By Craig Erlam  

Tuesday has been a relatively quiet session with the US bank holiday weighing on activity and those remaining having an eye on Friday’s jobs report. But the day hasn’t been without interest as the RBA opted against hiking interest rates again.

The Australian central bank surprised last time in raising rates another 25 basis points, but this time around, policymakers opted for a hawkish pause. Like many other major central banks – Bank of England excluded – it has reached a point at which every decision could swing either way depending on recent developments.

Central banks are keen not to overtighten due to the immense pressure tightening has already put on households and businesses, but after being so late to start the process, they desperately don’t want to pause too soon and risk inflicting higher rates for longer which could be much more damaging again.

It would be easier if they had seen more progress to this point, but inflation is proving stubborn and economies, so far, very resilient. Further tightening still looks likely at this stage, with markets pricing in a 75% chance that we see that by the August meeting.

Things to get hotter between Musk and Zuckerberg

Elon Musk may be aggravating his userbase at just the wrong time, with Facebook parent Meta announcing that it will launch its version of the platform, Threads, on Thursday.

It will be a direct competitor to Twitter and, based on released screenshots, it will look and behave in a very similar fashion.

With Musk desperately trying to push people to pay a subscription fee for Twitter, Threads may offer a simple alternative that may force a rethink of that strategy.

Given the userbase Meta already has, Musk can’t afford to underestimate the threat that the new platform poses and it may be very hard to win the audience back if they rapidly switch en masse.

Oil quickly loses momentum

Oil prices are rising again after giving back all of Monday’s early gains and more as the session progressed.

Buoyed by the news of Saudi Arabia extending its voluntary 1 million barrel output cut by a month to August, alongside Russia cutting exports by 500,000 in the same month, Brent crude rallied more than 1% and looked on course to increase its winning streak to four sessions, but that’s not how it turned out.

Prices are rising again, but remain shy of Monday’s peak and if it falls short then doubts may grow around its ability to take the next step and even break above its recent trading range.

That range has consolidated over the last couple of months, but not to any significant degree that suggests a breakout is imminent, with prices recently fluctuating between $72 and $77.

A big hurdle for gold

The gold recovery continued into a fourth day Tuesday although so far it hasn’t been particularly inspiring.

We’ve seen a modest rebound since the yellow metal slipped below $1,900 and nothing has really improved fundamentally that would warrant any more. Central banks are still desperately trying to gather any evidence that inflation is on a sustainable path back to target and falling short.

The price has moved back towards a region that was a key area of support in May and early June and this could represent the first big test of the recovery.

A move above the $1,930-1,940 zone could be a bullish signal, at least in the short term, at which point $1,960, $1,980 and $2,000 could come back into focus.

But that’s a big hurdle to overcome first.

 

Craig Erlam is Senior Market Analyst, UK & EMEA at OANDA

Opinions are the author’s, not necessarily that of OANDA Global Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. Losses can exceed investments.