Market update: RBA minutes, UK wages and US bank earnings

• AUD strengthened after RBA minutes indicate potential further tightening
• UK wages outstrip inflation, but decline helps alleviate rate hike fears
• US banks in view, with earnings from Bank of America and Goldman Sachs

Minutes from the RBA brought a surge for the AUD, with markets realising that the latest hike may not necessarily represent the end of the tightening process. With new Governor Michele Bullock at the helm, she clearly felt the need to await further data before deciding whether additional rate hikes were necessary. That data dependency should ensure greater AUD volatility around each forthcoming economic release, while an appearance from Bullock tonight brings a swift opportunity to gauge how her stance differs from her predecessor.

The pound has suffered sharp losses this morning, following the release of annual earnings data that saw wage growth outstrip inflation for the first time since October 2021. With wage growth of 7.8% well above the 7.1% inflation rate, workers can enjoy positive real wages growth after a period of depleted savings. While a decline in wage growth could help ease inflation concerns, a rise in real wages does increase the ability for consumers to spend in this inflationary environment. Nonetheless, with the Bank of England undoubtedly concerned at the rise of wages over recent months, today’s decline eases concerns that we could see another rate hike in the near term. Job vacancies have decreased, but the high wage growth in sectors like finance suggests an active job market which could buoy service sector stocks.

Looking ahead, US markets see an increasingly busy earnings calendar. Despite ongoing geopolitical fears, markets have proven remarkably resilient in part thanks to the strength of US earnings data being released. With Q3 earnings season thus far dominated by banking sector outperformance, today’s Bank of America and Goldman Sachs data will hopefully carry on that theme. Quite clearly, the financial sector remains in a place where it enjoys the benefits of higher rates, without the economic weakness they have been expected to bring.