Daily Commentary BY THE CURVE TEAM –

Volatility in Markets Continues as RBA Releases Outlook Update

12th of February, 2018

Markets finished the week same way they started, with plenty of volatility. While the close of the week was far more positive that it could have been, it sets up for an interesting few weeks ahead. Meanwhile the RBA revealed the key to the outlook in Friday’s Quarterly Statement on Monetary Policy.

Similar to earlier in the week, things looked very precarious for markets as the session evolved on Friday night. A rather quiet open to the session soon gave way to more equity selling and bond market strength. What was different this time was that there was a big turnaround going into the close.

The wash up for the week was the USD finished firmer, equity markets lower and the bond market finished where it started. It is the bond market that is the market to watch if you want to know where other markets are likely to go over the weeks and months ahead.

The key for local markets, in particular interest rates, was Friday’s Quarterly Statement on Monetary Policy. While the forecasts were little changed from those seen in the November Statement, the RBA is making it quite clear what holds the key to the outlook.

I will take a look at what the RBA had to say in the SoMP, the outlook for the US Bond market and what it means for markets and the global economy more broadly in this months Curve Monthly Insights due out tomorrow.

Other key things to look out for this week are the NAB monthly business survey tomorrow, Westpac’s consumer sentiment report on Wednesday and the latest employment data on Thursday.

David Flanagan

Director - Interest Rate Markets