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Market Musing, Asia Pacific

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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10 Dec 2024

RBA: Moving closer to rate cuts

As widely anticipated the RBA held interest rates steady at 4.35% once again at today’s meeting, the final one for 2024. This is where policy has been since November 2023. However, some adjustments to the RBA’s guidance do suggest the door to interest rate relief starting to be delivered in H1 2025 has opened a bit further. Prior rhetoric that the Board “is not ruling anything in or out” has been jettisoned, as was the comment that policy “will need to be sufficiently restrictive” until there is confidence inflation is heading sustainably towards target. Instead, the RBA notes that while...

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04 Dec 2024

AUD: Temporary GDP hammer blow?

The now dated Q3 Australian GDP has exerted downward pressure on the AUD (now ~$0.6415) with the already sluggish underlying growth picture undershooting analysts forecasts. This won’t surprise businesses at the coalface, particularly those in goods-producing and interest rate sensitive industries, with the GDP figures once again showing that higher mortgage rates and elevated prices are constraining private sector activity. The Australian economy expanded by 0.3% in Q3. As a result, annual growth decelerated to just 0.8%pa. Outside of the COVID lockdowns this is the slowest annual pace since the early-90’s recession. The detail in the national accounts can be...

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