Bullish Sentiment Persists on Tuesday

Equity indices soared on Monday, fueled by a short-squeeze rally, trying to cancel their immediate bearish trends. Commodities also rocketed higher as traders sold the USD aggressively.

Pivot incoming?

It looks like investors are beginning to question if central banks will continue to battle inflation aggressively as threats to financial stability increase.

In contrast to market expectations for a 50 bps rate increase, the Reserve Bank of Australia (RBA) stated on Tuesday during Asian trading hours that it has increased its policy rate by 25 bps, to 2.6% from 2.35%. The RBA emphasized in its policy statement that the data and outlook for inflation and the labor market will decide the magnitude and timing of future rate increases.

Tuesday’s economic data schedule is mainly empty, but investors will be watching the August Eurozone PPI for more information on the region’s inflationary pressures. The index is predicted to increase by 4.9% on a monthly basis and 43.1% annually.

August Factory Orders and JOLTS Job Openings will be on the US economic schedule later in the day. During the American trading hours, speeches by the presidents of the Cleveland Fed and New York Fed are scheduled.

The United Kingdom’s political and economic unrest consistently sets off erratic market reactions. The UK government proposed a 45% income tax cut, however, British Finance Minister Kwasi Kwarteng subsequently announced they were abandoning the plan. The news supported the GBPUSD pair, sending it above 1.14 again.