The RBA raised its Cash Rate as was widely expected by 0.25%, but the explanation that came with it was seen as a mildly hawkish tilt, pushing the AUD a bit higher.
- The Reserve Bank of Australia held a policy meeting earlier today where it raised its Cash Rate as expected by 0.25% to 4.35%. The AUD is even more confirmed as the major currency with the highest interest rate and will become more attractive as a potential long component as a carry trade. The meeting was seen as a minor hawkish tilt, as although the hike was widely expected, the commentary made it clear that controlling inflation or potential inflationary pressures has become a bigger priority than protecting growth, in the wake of the crude oil price shock. This has pushed the Aussie a little higher in the currency market. Australian inflation currently sits at 4.6%, well above the 2%-3% official target rate set by the RBA.
- The USA yesterday launched "Project Freedom", a military operation to open the Strait of Hormuz to free navigation (as it should be under international law) after Iran forcibly closed it. There have been exchanges of fire but only in the naval theatre, with the USA claiming to have sunk several Iranian "fast boats" whose job was to ensure the Strait remained closed. President Trump threatened that Iran would "be wiped off the face of the earth" if they attacked any US ships. They have, and Trump has not yet acted on this threat. Furthermore, Iran launched an unprovoked attack of ballistic missiles and drones against the U.A.E., with Dubai as the main target, hitting an oil facility. There has been no direct response to that either, although late yesterday it looked as if the war would erupt again with full force. It is likely that President Trump wants to focus just on getting the Strait reopened, which would weaken Iran's negotiating position (if they have one), and bring down the prices of crude oil and gasoline. Both RBOB Gasoline futures and Brent Crude Oil futures closed yesterday at fresh long-term highs. Trading these instruments or similar ETFs such as BNO or UGA is risky as they can unwind dramatically if peace breaks out, but the impetus towards further conflict right now seems clear. I am personally long of Brent Crude and Gasoline, and many trend traders will be also.
- The prediction market Polymarket currently sees a 40% chance that traffic in the Strait of Hormuz will return to normal by the end of June but does not see a peace deal as likely until the second half of 2026.
- Generally bullish stock markets cooled a little yesterday with the shooting in the Strait of Hormuz, with both the S&P 500 Index and the NASDAQ 100 Index closing a little lower yesterday, as did many other stock market indices.
- Bitcoin is back in focus as its medium-term bullish trend continues, with the price breaking above $81,000 and again reaching a new 3-month high for another day. This is significantly bullish. Some traders will be long here. I prefer to wait for 6-month highs, which in the case of Bitcoin right now is a lever just below $100,000 which is still quite far away. Technically, the price moved lower quickly when it was previously trading in this area, and that does encourage a view that it could now rise quickly too in the same area.
- In the commodities market, Corn futures reached a new 1-year high yesterday. Trend traders might be interested in going long here. If Corn futures are too big for you, there is a US ETF which is more affordable (CORN).
- In the Forex market, the strongest major currency since the Tokyo open was the Euro, while the Australian Dollar has been the weakest, although it has regained some ground from its low. As well as the Aussie, there is a lot of focus on the Japanese Yen and Bank of Japan intervention - whether the Bank of Japan has a chance to succeed in propping up the Yen.
- There will be releases later of potentially high impact data concerning the USA and New Zealand:
- US ISM Services PMI
- US JOLTS Job Openings
- New Zealand Unemployment Rate & Employment Change