SoMP Preview and what comes next for the ASX200

Wrapping up a massive week for antipodean markets, the RBA’s Quarterly Statement of Monetary Policy (SoMP) that contains the RBA’s key forecasts is released tomorrow.

Australia

The last SoMP was in August, pre extended lockdowns in Sydney and Melbourne, and the vaccination rate surge during the quarter.

As a result of the recent bond market turmoil, the statement accompanying Tuesday's RBA interest rate decision included greater detail than usual, stealing much thunder from tomorrow's SoMP.

Below is a comparison of the RBA’s updated forecasts from Tuesday against forecasts from the August SoMP. Perhaps surprisingly, given higher than expected inflation and extended lockdowns, forecasts have changed very little.

GDP

RBA meeting Tuesday

The central forecast is for GDP growth of 3 per cent over 2021 and 5½ per cent and 2½ per cent over the following two years.

August SoMP

GDP growth is expected to be a little over 4 per cent over 2022 and around 2½ per cent over 2023.

Employment

RBA meeting Tuesday

The central forecast is for the unemployment rate to trend lower over the next couple of years, reaching 4¼ per cent at the end of 2022 and 4 per cent at the end of 2023.

August SoMP

The central forecast is for the employment rate to reach 4 ¼ percent by the end of 2022 and 4 percent at the end of 2023.

Inflation

RBA meeting Tuesday

The central forecast is for underlying inflation of around 2¼ per cent over 2021 and 2022 and 2½ per cent over 2023.

August SoMP

In underlying terms, inflation is expected to be 1¾ per cent over 2022 and 2¼ per cent over 2023. 

Therefore, the real interest will not be in the details but an explanation of why forecasts have changed so little despite all that has happened and the cajoling of the bond market.

 

Turning now to the ASX200. As viewed on the chart below, after four consecutive tests of the support near 7310 (from the top of the broken trend channel), the ASX200 spring boarded higher yesterday and built on those gains today.

Providing the ASX200 holds above the support from the quadruple low 7310 area, we remain bullish, looking for a retest of the August 7632 high, with scope towards 7750 into year-end.

ASX200 daily chart Nov 4th

 

 

Source Tradingview. The figures stated areas of November 4th, 2021. Past performance is not a reliable indicator of future performance.  This report does not contain and is not to be taken as containing any financial product advice or financial product recommendation

 

How to trade with City Index

You can trade easily trade with City Index by using these four easy steps:

  1. Open an account, or log in if you’re already a customer 

    Open an account in the UK
    Open an account in Australia
    Open an account in Singapore

  2. Search for the company you want to trade in our award-winning platform 
  3. Choose your position and size, and your stop and limit levels 
  4. Place the trade

 

 

 

 

Build your confidence risk free
Join our live webinars for the latest analysis and trading ideas. Register now

StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.