Sentiment Soars on Temporary Tariff Reversal
AUD
The Aussie Dollar opens stronger this morning after Trump decided on a 90-day pause for the 'higher reciprocal tariffs' for countries that have not 'retaliated' against his announcements from last week. That is, all countries except China. China's tariff rate was whacked up to 125%, while every other country is at the 'universal' tariff rate of 10% for the next 90 days. Sentiment improved on the news, with global stocks and risk-sensitive currencies benefiting. Prior to the news, Asian equities were mixed with the Shenzhen and Hang Seng +1.0% and +0.7% while the Nikkei gave back previous gains, down -3.9% and the ASX slid -1.8%. Prior to Trump slapping China with additional tariffs, Beijing announced they would raise tariffs on U.S. goods to 84% to a broad risk off reception in the market. Commodities were mixed with Crude Oil in the green +5.3%, Gas -6.2%, Gold -0.4% and Silver +1.8%. Today will see a bit of data. To start the day off we have our MI Inflation Expectations. Out of China will see their CPI y/y and PPI y/y. They are looking for a small CPI uptick of 0.1% y/y and on the other hand, PPI is likely to remain in negative territory for 30th consecutive month. Our local main event will be RBA Governor Bullock speaking tonight. Eyes will be on commentary regarding Trumps tariffs.
USD
AUDUSD opens stronger this morning at 0.6139 with President Trump placing a 90-day pause on reciprocal tariffs (except China) overnight which sparked a huge rally across financial markets. On Wall St, the Nasdaq had its biggest day since 2008 and closed +12.2%, while the S&P 500 and the Dow Jones closed +9.8%, and +7.9% respectively. It was relative quiet night with only low tier data. However, FOMC Meeting Minutes were released. Federal Reserve policymakers worry U.S. President Donald Trump's trade policy could deal a blow to economic growth, but are signaling they won't be quick to ride to the rescue with interest rate cuts because they expect increased tariffs to boost inflation. Tonight, will see their CPI data. Markets are projecting headline CPI to come in at 2.8% y/y, with the core reading expected at 3.1% y/y. Unemployment Claims will be out as well. To end the week PPI and Core PPI on Friday night.
EUR
AUDEUR opens stronger this morning at 0.5606 after hitting highs of 0.5636, as risk sentiment improves with Trump announcing a 90 day pause on reciprocal tariffs (except China). European equities closed on the back foot with the DAX and CAC -3% and -3.3%. It was a quiet night with no economic data out. Tonight, they have Italian Industrial Production m/m and Spanish 10-y Bond Auction.
GBP
AUDGBP opens stronger this morning at 0.4790 after hitting highs of 0.4813, as risk sentiment improves with a 90 day pause on reciprocal tariffs. Out of London the FTSE closed -2.9%. Last night, the Bank of England's Lombardelli stated ‘Tariffs are likely to depress activity’. The FPC Statement stating, the global risk environment has deteriorated, and uncertainty has intensified. A range of risky asset prices, led by those denominated in US dollars, have declined sharply. The probability of adverse events, and the potential severity of their impact, has risen. The main UK event will be tomorrow their GDP m/m, that is expected to come in at 0.1% from -0.1%.
NZD
AUDNZD opens slightly stronger this morning at 1.0882 after reaching highs of 1.0913. The RBNZ cut its Official Cash Rate (OCR) by 25bp as expected to 3.5%, marking the fifth cut of the cycle and bringing the total reduction to 200bp. This also sees the central bank slow its pace of easing, following three prior cuts of 50bp each. There is no data out today.