RBA Meeting Minutes Offer Hawkish Tilt

AUD

The Aussie dollar had a mixed day against most majors, finding some traction early post hawkish RBA meeting minutes, holding the gradual positive trajectory of the week against some pairs while falling short elsewhere in the face of bullish central bank speak. Yesterday's RBA Monetary Policy Meeting Minutes dominated the Asian session, which offered a hawkish tilt and supported AUD. It was revealed that the option of a 40bps hike was attractive to the board "given the upside risks to inflation and the current very low interest rates." After the release of the minutes, markets are now pricing in 35bps of upside in the next June meeting which indicates a 2/3 change of a 40bps hike. Local Equities were in the green with the ASX up 0.3%, the NIKKEI up 0.4% and the Shanghai Comp the best performer gaining 0.6%. In Commodities we saw Gold lose -0.4% and Iron Ore down -0.2%. Looking forward we will observe the Wage Price Index q/q released at 11:30 this morning which may have more significance than usual with rising inflation and greater focus on the political talking point of the possibility of raising the minimum wage in Australia.

USD

The Aussie dollar holds its recent momentum against the Greenback finding enough support to reclaim the 0.7 handle, currently trading at 0.7031 at time of writing. In US Equities, we saw green as the bleeding seems to have stemmed with the DOW JONES up 1.3%, the S&P 500 up 2.0% and the NASDAQ the best performer up 2.8%. The FEDs Chairman Powell sparked a 14bp rise in 2-year yields when he reiterated his main priority was curbing inflation. Further adding that inflation was much too high, yet looked to reassure that the Fed had the tools and resolve to bring it back to 2%, indicating that 50bp hikes were expected at upcoming meetings and stressing that the Fed would not hesitate in raising the case rate above the neutral level. On the US Macroeconomic calendar we saw positive US Core Retail Sales up 0.6%, higher than expectations of 0.4% yet falling short off last month’s 2.1%. While US Retail Sales for April rose 0.9%, down from a significantly upwardly revised 1.4% and falling just short of expectations of 1.0%. Released a little after, April Industrial Production rose  1.1% to easily beat expectations of 0.5% with Capacity Utilisation at 79.0% to beat expectations of 78.6%. Looking ahead: the second round of US data releases will be seen tonight beginning with the Building Permits, Housing Starts and finishing with Crude Oil Inventories. Although these are not expected to be major market movers. Instead Thursday nights Philly Fed Manufacturing Index, Unemployment Claims and Existing Home Sales data releases will be more likely to have a larger impact on the pair with projections currently quite conservative.

EUR

The AUDEUR pair has lost some of the steam we saw over the last two days currently trading at 0.6663, amid hawkish ECB speak cutting short the post-RBA meeting minute gains. The ECB’s Council member Klaas Knot told the Dutch TV on Tuesday that a 50 basis points rate hike should not be excluded if data in the next few months suggest that inflation is broadening and accumulating. Prefacing a 25bp hike in July is realistic, adding that the ECB needs to normalise its policy. This was later supported by ECB’s chairman Centeno when he hit the wires commenting that ECB normalisation is something that is desirable, with markets showing inflation is anchored, adding even more support to hawkishness around ECB slow mover position coming to an end and action on Interest rates to be imminent. In local data yesterday we saw Italian Trade Balance falling short at -0.08B against projected 0.79B and a previous of -1.77B, Flash Employment Change q/q remained relatively flat at 0.5% meeting expectations, and just short of previous 0.4%. While Flash GDP q/q came in positive at 0.3% slightly up against projections of 0.2% and previous of 0.2%. In Eurozone Equities the DAX was in the green up 1.6%. Looking ahead we will see the releases of Final CPI y/y and Final Core CPI y/y tonight, with the German 30-y Bond Auction wrapping up the nights data.

GBP

The Aussie has lost out to Sterling, reaching a high of 0.5681 in yesterday’s late afternoon before falling to 0.5630 at time of writing. It was a battle of Monetary policies between the two central banks. Beginning with RBA hawkishness, which was short lived as ECB talk and strong UK data whipped the Aussie back in to place. The UK Unemployment Rate in March fell to 3.7% from 3.8% the lowest level since 1974, with job vacancies remaining at record highs. In UK Equities the FTSE saw green, gaining 0.7%. Eyes are focused on the CPI data releases at 4pm this afternoon to see if the UK can continue a trend of positive releases in a local environment that is still discussing the possibility of an imminent recession. This will be followed PPI Input and Output data along with RPI y/y and HPI y/y.

NZD

The Aussie is trading in choppy conditions against its little cousin from across the ditch currently buying 1.1052 at time of writing. Both currencies have been riding the wave of risk sensitivity in the market with the two remaining relatively flat over the week. Not much in terms of local data as per usual yet looking ahead we will see the PPI Input and Output on Thursday morning followed by their Annual Budget Release at midday.