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Market Musing, Asia Pacific

08 Apr 2025

Global risks don’t equate to a crisis

Last week’s ‘reciprocal tariff’ announcements by the US, and subsequent retaliation last Friday by China, has caused a fair degree of market upheaval. Given the broad-based and outsized tariffs imposed on goods shipped to the US, concerns about downside growth and upside inflation risks have spiked, and this has triggered an abrupt repricing in ‘complacent’ asset markets (chart 1). Equities and commodities have tumbled sharply over the past few sessions, as have growth-linked currencies such as the NZD and particularly the AUD which has plunged to levels last traded in the early dark days of COVID (now ~$0.6030). In our...

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01 Apr 2025

RBA: Navigating the uncertainty

After kicking off its policy recalibration at its meeting in February the RBA kept the cash rate steady at 4.1% today. This was widely expected. The RBA’s post meeting statement didn’t provide any strong signals about the timing of the next possible move. This is also something Governor Bullock tried to avoid in her press conference. Uncertainty clouds the domestic and global landscape; hence the RBA is awaiting some clarity as it navigates the tricky terrain. With there being upside and downside risks around the outlook, and with the Board “cautious” about how things may pan out, the RBA reiterated...

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27 Mar 2025

AUD/EUR: signs of life emerging

The jump up in the EUR over March, particularly in the first few weeks of the month, on the back of the optimism about the Eurozone’s growth prospects stemming from the ‘sea change’ in fiscal/defence spending, has been a key theme in FX markets (chart 1). The EUR’s resurgence has also been an important force that has dragged crosses like AUD/EUR and NZD/EUR to the lower end of their respective multi-year ranges. At face value, the underlying shift coming through with regards to fiscal spending and infrastructure investment by governments is a longer-term economic support for Europe. This helps reinforce...

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19 Feb 2025

AUD/NZD: RBNZ downshift continues

The cavalier Reserve Bank of New Zealand continues to spread its ‘dovish’ wings. The RBNZ announced another 50bp interest rate cut today, the third straight meeting it delivered an outsized reduction. The move lowers the Official Cash Rate to 3.75%, after being as high as 5.5% last-July. As shown, outside of the GFC, the 175bps worth of rate cuts delivered by the RBNZ over the past 7 months has been the most abrupt policy U-turn in several decades (chart 1). The rapid-fire reduction in the level of the RBNZ OCR follows the very abrupt hiking cycle that was unleashed on...

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18 Feb 2025

RBA: Gradual ‘relief’ cycle kicks off

After delivering a string of rate hikes over 2022/23 and holding steady since November 2023 as it battled against inflation the RBA announced a bit of interest rate ‘relief’ at today’s meeting. The RBA cut the official cash rate by 25bps, lowering it to 4.1%. This was largely expected with it being ~90% priced in before the meeting, and with 30 of 34 economists surveyed forecasting it. The move will provide some income support for indebted mortgage holders and interest rate sensitive businesses. But it isn’t a large jolt. On our figuring, a 0.25% reduction lowers the monthly repayment on...

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