Markets Anticipating a 15bps Rate Hike at 2.30pm Today

AUD

All eyes are on the RBA at 2:30pm this afternoon after what was a subdued 24 hours for the AUD, with a mixed performance against the majors without any extensive movements in either direction. Asian equities were mixed on Monday, with the CSI +2.4% and Nikkei -0.1%. Meanwhile, the ASX was down 1.2% with tech stocks leading the decline. Also weighing in on the AUD were Iron Ore and Gold which were down -0.3% and -0.2% respectively. Market consensus suggests the RBA will step up its interest rate by 15 basis points to 0.25%. The recent print of Australian yearly inflation at 5.1%, much higher than the market forecasts of 4.6%, and the prior print of 3.5% has markets predicting a rate hike by the RBA at 2.30pm today. No guarantee that a rate hike will happen, though markets suggest that Governor Lowe will look to avoid hiking in-line with the upcoming Federal Election. Restrictions in China due to coronavirus extended in Beijing, further fuelling concerns about global growth. The official Chinese NBS PMIs released over the weekend indicated a sharp economic contraction in April. A big day ahead.

USD

The AUDUSD remains slightly heavier this morning to drop down to as low as 0.7030 before recovering to 0.7050 at time of writing. Wall St rallied late in the overnight session with the NASDAQ closing +1.6% while the Dow Jones and the S&P 500 were +0.2% and +0.5% respectively.  US 10-year yields traded +4bps higher to settle just below 3%. US yields continued their ascent with the benchmark 10-year yield moving up to 3.00% for the first time since 2018. This kept the greenback in demand, as well as Certainty of a jumbo rate hike by the US Federal Reserve is underpinning the greenback against other risk-sensitive currencies. The big dollar largely ignored some weaker than expected data from the US, with their ISM Manufacturing for April falling to 55.4, down from 57.1 and below expectations of 57.6. Key sub-indices were weak with misses for Prices paid, New Orders and Employment. The US will release their JOLTS Job Openings data late tonight, with the forecasted openings predicted to decline from 22.27M to 11.19M for April.

EUR

The AUDEUR trading slightly higher, but still flirting around the significant level of 0.67 as the Aussie Dollar hasn’t been able to establish a supportive foothold after risk entered markets in late April. European equities fell sharply, with the CAC 40 down 2.8% and Euro Stoxx 50 -1.9%. European data was mixed overnight, Euro-area final April Manufacturing PMI was 55.5, up from a preliminary reading of 55.3. German retail sales for March were -0.1%, missing estimates of 0.2%. Spanish April Manufacturing PMI was 53.3 (54 expected), Italian was 54.5 (53.6 expected) and French was 55.7 (55.4 expected). Finally. Eurozone Economic confidence failed to meet expectations of 108.0 printing at 105.0, the lowest in a year. Europe remains to sit on their hands regarding macroeconomic policy, with ECB vice-president Luis de Guindos said that a rate hike in July is possible, although unlikely. European Unemployment is set to be released later tonight but its importance is muted as it is a lagging indicator.

GBP

The AUDGBP reclaimed some lost ground up to climb up to 0.5642 this morning. Nothing but radio-silence from the Britts as May Day in the UK meant a bank holiday was observed. It could look like the calm before the storm as later this week the BoE will join the RBA and Fed Reserve in handing down their latest Interest Rate Decision and Forward Guidance, with a further rate hike expected to bring the Cash Rate to 1.00%.

NZD

The AUDNZD ticks slightly higher this morning, moving up to 1.0955 currently. Nothing in the way of major data out of the Kiwis yesterday, though the RBNZ will release their Financial Stability Report at 7am tomorrow morning along with a media conference shortly after. The report provides insights into the bank's view of inflation, growth, and other economic conditions that will affect interest rates in the future. The other major data release will be Kiwi Employment data with the Unemployment Rate set to contract from 3.2% to 3.1% for last quarter.