Futures Markets Say RBA Will Pause Rate Hikes Tomorrow

AUD

The Aussie dollar opens up mixed against the major currency pairs this morning with risk sentiment remaining elevated through the weekend. Asian equities closed the week with a high with Nikkei adding 0.9%, Hang Seng + 0.7%, Shanghai Comp +0.4%. The ASX also ended on Friday with + 0.8% with the materials sector being the top performer. Commodities have however closed mixed with Crude Oil +1.7%, Natural Gas +9.2%, Gold -0.7%, Iron Ore -1.4% and Silver +0.9%. Looking ahead and the Australian MI Inflation Gauge m/m, Building Approvals m/m and Retail Sales m/m and Commodity Prices year on year will be released today. This is followed by the unofficial Chinese manufacturing PMI data for March, with an expected minor decline due to deteriorating global demand conditions. Tomorrow at 2.30pm is the main event of the week with the RBA's next Cash Rate decision at which the RBA is now expected to pause its rate hike cycle. Future markets this morning are pricing in only 4bps of tightening for tomorrow's decision which lends itself to a hold, and there are only 9bps priced in for April and May combined. Recent dips in the CPI data have obviously convinced markets that the fight against inflation is won and done.

USD

The AUDUSD pairing has been choppy, setting fresh one-week highs on Friday afternoon after the decent Chinese PMI data, before shedding one full cent in to the early evening, reaching lows of 0.6697. The weaker US inflation data then opened the door to another recovery into Saturday morning before finally sliding to where we open this morning at 0.6681. US equities closed higher with the NASDAQ +1.7%, S&P 500 +1.4%, and the Dow Jones +1.3%. The U.S two year yields however fell 10bps to 4.03%. To Friday's data, and US personal income rose 0.3% beating the expected 0.2%, while personal spending rose 0.2% which fell short of the expected 0.3%. The Fed's favoured consumer inflation measure, Core PCE, was at 0.3% m/m, and 4.6% year on year with both results being lower than expected by 0.1%. The reduction in inflation numbers would have been pleasing for the Fed Reserve. Looking forward, and a busy week ahead for US data, staring with tonight's ISM Manufacturing PMI. Every night this week there will be high impact data, finishing with Friday's monthly Non-Farm Employment report. 

EUR

The beleaguered AUDEUR managed to hang on to its grip on recent 18-month lows, grinding higher over the weekend and opening at 0.6170 this morning. European equities were mixed on the close with the Euro Stoxx 50 down 0.2%, DAX + 0.7%, CAC +0.8%. To the data, and the much anticipated EU CPI data was released, with March showing a 0.9% increase and an increase of 6.9% for the full year, with results both 0.2% lower than forecast. The Core CPI data for the year, which excludes some of the most volatile components, however actually showed an increase from 5.6% to 5.7% which is a worry for the ECB. EUR weakened on marginally in the aftermath. Looking ahead, and this week's data contains tonight's Manufacturing PMIs from all of the larger members of The Zone, followed by the Services equivalent PMI on Wednesday evening.

GBP

The AUDGBP gave up the 0.54 handle in late Friday trade, before recovering to open relatively flat this morning at 0.5417. UK Equities closed higher with the FTSE 100 +0.05%. To the data, and we have the Final Manufacturing PMI to be released today which is a leading indicator of economic health, the results of which are expected to show no improvement at a contractionary 48.0. Looking forward on the week for GBP there will be scattered data with Housing Equity Withdrawal q/q, MPC Member Tenreyro Speaks, and Halifax HPI m/m.

NZD

AUD/NZD opens lower this morning at 1.0702 having given up the 1.07 handle in late weekend trade to forge fresh 3-month lows at 1.0658. This week will be massive for AUDNZD with both central banks in action; the RBA set to pause rates tomorrow and then the RBNZ set to raise rates by a further 25bps on Wednesday. This sets AUD up for a potentially difficult week against its Trans-Tasman counterpart, with NZD buyers desperately waiting for the RBNZ to put a halt to their rate hike cycle.