RBA Meeting Minutes Due Today
AUD
The Aussie dollar opens mixed against majors this morning after a quiet day on the data front. The ASX finished Monday’s session down -1.4% in a broad sell-off, reaching its lowest level in more than 3 months, while Asian equities slumped with the Hang Seng the worst performer, down -2.65%. In Australia today, we’ll see the RBA Board meeting minutes published which will poured over for hints of an imminent pause to cash rate hikes. Governor Lowe already noted several days after the March board meeting that he had ‘an open mind’ about the outcome of the April board meeting and ‘with monetary policy now in restrictive territory, we are closer to the point where it will be appropriate to pause interest rate increases”. At the same time, the RBA Board would be brave to tighten further if financial markets remain on edge (think Silicon Valley Bank, Credit Suisse etc). As mentioned, keen focus will remain on today’s meeting minutes release for any hints at the RBA’s next move.
USD
AUDUSD opens slightly up at 0.6717 after a volatile session saw the rate brush 3-week highs of 0.6730. Improved risk sentiment saw Wall St closed the session up, with the Dow Jones +0.3%, NASDAQ +1.1% & S&P 500 +0.9%. Minimal data leading up to Thursday morning’s interest rate decision and FOMC statement where the Fed is expected to hike by another 25bps, taking the rate to 5% where they’re expected to maintain before rate cuts later in the year. Given recent (subjective) easing in global banking turmoil, including buy outs, bail outs & collective central bank support, we could see a 25bps move as a sign of confidence in the market’s solidity. Even so, the past 2 weeks have shown how news can change market conditions suddenly, so caution around fiscal direction remains on the table.
EUR
AUDEUR opens at 0.6266, being slightly down relative to this time yesterday given further Hawkish ECB commentary. ECB’s Kazak noted the central bank isn’t done on rate hikes if the baseline holds up, adding that it’s easier to repair hiking too much than not enough. The DAX & CAC closed up +1.1% & 1.3% respectively. A number of other ECB members hit the wires, with President Lagarde indicating that ii not for recent turmoil in the banking system, forward guidance would have stressed the need for further hikes. Tonight, Lagarde’s speaking at another banking conference titled “Central Bank Digital Currencies: Keeping momentum in uncertain times” in Basel, while markets gear up for major eurozone PMIs on Friday. Interestingly, European PMIs have recently painted a rather encouraging picture for near-term growth in the eurozone. If the trend continues on Friday, the data may endorse the ECB’s recent decision to continue hiking despite banking turmoil.
GBP
AUDGBP opens down at 0.5472 while the FTSE ended the session up +0.9%. Little in the way of data yesterday, while Thursday will see the Bank of England’s interest rate decision. Market’s are currently expecting a 25bps hike, which would take the rate to 4.25%, although it’s a 50/50 call given current market volatility. More precisely, markets are pricing in a 57% chance of a rate hike, although a GBP rally could be prevented by policymakers firmly signalling a pause.
NZD
AUDNZD opens up at 1.0756 despite positive trade balance data from our friends across the Tasman Sea. The figure came in at -714m, well-above expectations of -1.5b, and reflects rises in both imports and exports despite tropical cyclones causing ripples in their economy. Tomorrow, we’ll see Westpac Consumer Sentiment data.