Risk-Off Weighs on AUD Ahead of RBA Decision

AUD

Risk-off sentiment sees the Aussie Dollar fall across the board, as tariff fears offset a pickup in China’s factory activity, expanding at the fastest pace in year (Manufacturing PMI 50.5), signaling Beijing’s stimulus measures are helping prop up an economic recovery. Asian equities sold off to start the week, with the Nikkei -4.0% to its lowest level in 6 months, whilst the Hang Seng was -1.3% and the ASX 200 was -1.7%. Commodities closed mixed with Gold and Silver both up 0.2%, and 0.4% respectively, Iron Ore +0.3%, and Copper -1.5%. We'll see Aussie Retail Sales data later this morning ahead of the RBA interest rate decision this afternoon. It is expected the Board will keep the cash rate target unchanged at 4.10%. The RBA's forecasts in February had inflation remaining a little above the 2.5% target band mid-point out to mid-2027 and the latest data is unlikely to have materially changed the RBA's views. Consequently, the Board is likely to express ongoing caution about easing policy too quickly and expect the Governor to emphasise data dependence moving forward. Futures markets only price in 10% odds of an interest rate cut today, so the RBA commentary will be key.
 

USD

The AUDUSD coupling hits near 4-week lows, opening at 0.6242 after being pressured from US tariff concerns, and better performing Chicago PMI results. A mixed close for US equities with The Dow Jones +1.0%, S&P 500 +0.3%, and the NASDAQ -0.4%. For US news, the Trump administration is expected to announce reciprocal tariffs on a wide range of imports and trade partners. These could incorporate tariffs, VATs, and non-tariff barriers into a retaliatory figure that may be unique for each trade partner. While media reports in recent days suggested these may be more targeted and narrower than initially implied, they may nonetheless elicit a significant market reaction. The US ISM Manufacturing Index for March is also set to be released. Over the past two months, the index has remained above the critical threshold of 50. However, given the uncertainty around trade, consensus expects this to pull back modestly to 49.9 (prev. 50.3). US job openings data for February will also print and could influence perceptions of labour market health. In January, the number of job openings increased to 7.74 million, but the overall trend has been declining since March 2022.
 

EUR

The AUDEUR opens lower this morning, hitting 3-week lows at 0.5771 after German CPI for March printed at +0.3% MoM and +2.2% YoY with both figures matching expectations. European equities on the other hand closed in the red with the DAX -1.3%, while the CAC -1.6%. For Eurozone news, preliminary Core CPI for March will be released tonight at 8pm expected to slow further to 2.5% y/y however, risks may be to the upside, as goods price inflation is showing signs of bottoming, and the more volatile components of services inflation have been picking up. ECB President Lagarde is also expected to speak at 11:30pm at an AI Workshop hosted by the ECB.
 

GBP

The AUDGBP coupling falls back to 5-year lows, opening this morning at 0.4832, with the M4 Money Supply, Mortgage Approvals, and Net Lending to Individuals releases all coming through lower than forecasted yesterday. UK equities saw the FTSE close in the red -0.9%. A few minor UK data pieces set for release spread throughout today with BRC Shop Price Index y/y, Nationwide HPI m/m, MPC Member Greene Speaking, and Final Manufacturing PMI. The next key piece of data out of the UK will be this Friday with their Construction PMI.
 

NZD

The AUDNZD opens flat at 1.1004, having fallen off yesterday before making a recovery at this morning's open. This comes after the New Zealand business outlook improved despite business confidence staying flat at +57.5 in March, with the main message from the survey continuing to be that the business environment is improving, but isn’t easy. Firms remain confident that better times lie ahead and are positioning themselves to take advantage of that as best they can, but many remain hampered by poor cashflow. No further NZD news today, however tomorrow morning we will get Building Consents m/m, and possibly the GDT Price index.