Morning Bid: The flight of doves

An ibis bird perches next to the Reserve Bank of Australia headquarters in central Sydney, Australia February 6, 2018. REUTERS/Daniel Munoz

Morning Bid: The flight of doves

A look at the day ahead in markets from Dhara Ranasinghe.

Even the most dovish central banks are now caving in, and accepting the need to act against persistent inflation. The latest case in point is the Reserve Bank of Australia.

Earlier on Tuesday, the RBA opened the door to its first interest rate hike in over a decade, dropping a pledge to be “patient” on policy. read more

Markets were already positioning for higher Australian rates, but the RBA’s pivot nonetheless pushed the Aussie dollar to its highest level since June.

Aussie dollar surges on hawkish RBA
Aussie dollar surges on hawkish RBA

Another dove, Sweden’s Riksbank, too changed tack recently and started talking about the need to hike rates this year.

With some European Central Bank policymakers pushing for tighter policy in 2022, the Bank of Japan and the Swiss National Bank are now the outliers. But watch that space.

Stock markets, meanwhile, are holding their ground. Asian shares rose to the highest in more than a month while European and U.S. stock futures are flat to a touch firmer.

On the geo-political front, the likelihood of more Western sanctions to punish Russia for the killings of Ukrainian civilians is lifting oil and hurting the euro. read more

The United States ratcheted up the pressure on Monday, stopping Russia from accessing more than $600 million out of reserves held at American banks to pay bondholders read more .

And it’s also time to start paying attention to France, which holds the first round of a presidential election this weekend.

Far-right candidate Marine Le Pen’s presidential campaign has gained momentum. She captured 48.5% of voter intentions in a poll of a likely runoff against incumbent Emmanuel Macron, the highest score she has ever notched. read more

Key developments that should provide more direction to markets on Tuesday:

– Final March PMIs

– EU to sell new 20-year green bond

– NATO Secretary General Jens Stoltenberg gives news conference – German foreign minister Baerbock meets U.S. Secretary of State Blinken

– EU Economic and Financial Affairs Council meeting.

– ECB speakers: Vice-President Luis de Guindos

– Federal Reserve speakers: governor Lael Brainard; Minneapolis Fed President Neel Kashkari; New York Fed President John Williams.

– U.S. trade balance/ISM index

– Romania Central Bank to raise interest rates

Reporting by Dhara Ranasinghe; editing by Sujata Rao

This article was originally published by Reuters.

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