Mortgage holders warned over ‘make or break’ figure, $A skyrockets

The Aussie dollar has rocketed by a full per cent in value overnight as the US dollar continued to deflate amid chaotic global financial movement.

The rise comes as frustrated mortgage holders in Australia are being warned of a “make or break” figure to be released on Wednesday.

The US dollar has lost a whopping 8 per cent of its value over concerns about tariffs, while the Aussie dollar has had a strong start to the year — putting the US70¢ mark within reach.

The US currency’s collapse has occured while precious metals such as gold (52 per cent), silver (96 per cent) and copper (36 per cent) have all surged.

The sell-off was accelerated overnight, sparked by talk of a joint intervention between US and Japanese authorities to support the yen.

Global stock markets mostly rose on Tuesday as investors geared up for the US Federal Reserve’s policy meeting outcome and earnings from tech titans, which will be pored over for signs of AI momentum.

In New York, the Dow blue-chip index ran into some profit-taking but the broader S&P index and the tech-heavy Nasdaq Composite rose.

Earlier Tuesday, Asian stocks brushed off South Korea-US tariff concerns, instead focusing on “hopes of strong earnings fromthe US tech heavyweights in the next couple of days”, said Richard Hunter, head of markets at Interactive investor.

Here in Australia, the ASX200 is set to rise by 0.5 per cent on opening.

Tech firms are enjoying a fresh boost ahead of earnings releases as traders continue to pile into all things artificial intelligence.

Apple, Meta, Microsoft and Tesla give updates this week, with other bellwethers including Texas Instruments, Boeing and Mastercardproviding an idea about the state of the US economy.

Boeing shares rose 1.8 per cent after the aircraft maker reported its first annual profit since 2018.

Concerns remain meanwhile over the scale of investment in AI even as its deployment has yet to pay off significantly.

Investor attention was also on the Federal Reserve’s policy meeting starting Tuesday.

The US central bank is widely expected to hold key interest rates steady on Wednesday, but “markets will be watching keenly to see if Chair (Jerome) Powell, who’s kept a tight grip on monetary policy, is to be replaced bya Trump dove,” said Derren Nathan, head of equity research at Hargreaves Lansdown.

Data released Tuesday showed consumer confidence in the United States plunged in January to its lowest level since 2014 as American households continue to fret about inflation and elevated costs of living.

Lale Akoner, eToro market analyst, said that weaker sentiment gives the Fed more room to wait before acting, as it indicates a gradual slowdown in growth than a downturn.

“If inflation continues to cool and growth softens gradually, rate cuts later in the year or into 2027 become more likely,” she said.

Markets currently expect to Fed to cut interest rates next in June or July. US President Donald Trump has meanwhile reverted backto tariff threats this week, warning South Korea he would impose 25 perc ent tolls on goods including autos for falling short of expectations on an earlier pact struck with Washington.

Nightmare scenario for homeowners

This all comes as frustrated mortgage holders are being warned of a “make or break” figure to be released on Wednesday that will decide if interest rates need to rise.

Ahead of the Reserve Bank of Australia’s first meeting of the year next week, the Australian Bureau of Statistics will release the December quarterly consumer price index at 11.30am.

The RBA will be watching the data closely as it continues its battle to keep Australia’s inflation rate between 2 and 3 per cent. In November, inflation was at 3.4 per cent.

Judo Bank chief economist Warren Hogan says if Wednesday’s quarterly inflation rate is at or higher than 0.8 per cent, the RBA will need to announce an interest rate hike next Tuesday, February 4.

“Interest rates are not high enough to get inflation down to target and restore price stability to the Australian economy,” he told Sky News on Tuesday.

Mr Hogan warned there could be multiple interest rate hikes as for the first time in years consumer spending is on the rise, meaning businesses can pass on rising costs.

“It was that weak consumer (spending) that kept inflation coming down, but with the consumer coming back that really opens the door for businesses to pass on those cost and inflation continuing to rise,” he said.

“The Reserve Bank aren’t going to be able to just do one or two, they are going to have to fully reverse the (three) rate cuts from last year and that is our best hope for minimising how many rate hikes there are.”

Oxford Economics Australia head of economic research and global trade Harry Murphy Cruise had a similar prediction for cash-strapped mortgage holders.

“What data lands at the end of the month, with 3.2 per cent being the magic number for trimmed mean inflation,” he said.

“Anything above that will warrant a hike when the RBA board next meets.

“Anything at or below should be enough for the board to hold rates steady.”

Betashares chief economist David Bassanese agreed, saying the quarterly inflation figure would either “make or break” the case for a rate hike next week.

“My base case remains that the quarterly gain in trimmed mean inflation will be 0.8 per cent, which should be enough to keep the RBA sidelined in February (given this result at least implies a deceleration in underlying inflation from the 1 per cent previous quarterly gain).”

NED-9108-Monthly-Inflation-Indicator

The ABS Bureau of Statistics recently shifted to including the full monthly inflation print in its monthly data, but confirmed it would continue to produce quarterly figures which the RBA will continue to use.

In November, Australia’s headline annual inflation rate dropped to 3.4 per cent from 3.8 per cent in the 12 months.

The all important trimmed mean inflation rate – which the RBA uses as it removes volatile and outlier price changes – fell to 3.2 per cent from 3.3 per cent over the last year.

Also weighing against mortgage holders getting a break is a surprising drop in the unemployment rate.

Australia’s unemployment rate has fallen to 4.1 per cent in December from 4.3 per cent the month before, as 65,000 new workers found a job in the final month of last year.

This was largely driven by a number of younger Australians entering the workforce on a full-time basis.

This is a worrying sign for the RBA as too many Australians working could increase their spending leading to a higher inflation rate.

The RBA has a dual mandate of full-employment and stable inflation.