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AUD

09 May 2023

US CPI in focus

• Cautious tone. US debt ceiling concerns, more signs of a global slowdown, & tonight’s US CPI inflation data are on investors minds.• US CPI. Markets now assuming no further Fed rate hikes & are factoring in over two cuts by year-end. Another high core inflation print could see rate cut bets pared back, supporting the USD.• Budget relief. Targeted measures aimed at low income households should provide some cost of living relief. But will it lead to more inflation down the track? Markets traded a bit more cautiously overnight with US debt ceiling concerns, more signs of a global...

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08 May 2023

AUD holding firm

• Calmer markets. US equities flat overnight, while oil & base metals edged a bit higher. US bond yields rose, with the AUD hovering just under ~$0.68• No credit crunch. Fed’s Senior Loan Officer Survey didn’t signal an imminent credit crunch. Rather, conditions are tightening inline with higher rates.• AUD events. Consumer sentiment, Q1 retail sales volumes, China trade data, & the Federal Budget released today. US CPI is out tomorrow night. A relatively quiet and uneventful start to the new week. Following the strong rise on Friday, US equities were flat overnight. By contrast, energy prices added to their...

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07 May 2023

Risk sentiment recovers

• Improved sentiment. US regional bank share prices bounce back. Data also shows that the US labour market remains tight.• Fed rate expectations. Markets continue to forecast rate cuts by the US Fed from Q3 2023. We think this is misplaced. US CPI released this week.• AUD recovery. Positive risk appetite has supported the AUD. Consumer and business confidence, and the Federal Budget are the local focal points. After some tremors earlier in the week, risk sentiment improved on Friday. Following the sharp falls over previous sessions, US regional banking stocks rebounded strongly, with the banks in focus (PacWest Bancorp...

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04 May 2023

US banking issues & another ECB hike

• US banks. Regional bank issues remain in focus. This has dampened risk sentiment, and is supporting expectations the Fed tightening cycle is over.• ECB hike. ECB raised rates by another 25bps. Tweaks to its guidance were viewed ‘dovish’, but we think this is a misread. President Lagarde was quite ‘hawkish’ with more rate rises expected.• AUD holding. AUD ticked up, with a bounce in AUD/EUR supportive. US non-farm payrolls released tonight. Strong data could question the markets rate cut bets. The re-emerging US regional banking sector concerns remain in focus. The issues continue to dampen risk sentiment, though FX...

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03 May 2023

Conditional US Fed pause doesn’t mean pivot

• Fed in focus. US Fed hikes again, but adjusts guidance. Fed is now data dependent. That doesn’t mean hikes have ended or cuts are coming soon.• Negative risk sentiment. Pushing back of rate cut hopes saw risk sentiment turn negative. US yields lower. USD lost ground against the EUR and JPY.• AUD softer. AUD eased back, with AUD/EUR below pre RBA rate hike levels. ECB expected to hike again tonight. Pressure on AUD/EUR to continue. The US FOMC decision was in focus earlier this morning. As widely expected, the FOMC raised rates another 25bps, taking the target range to...

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