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EUR

05 Apr 2023

Recession worries

• Recession worries. Softer US labour and services data has fanned recession fears. Cyclical assets have weakened. US bond yields have fallen.• Firmer USD. The USD has edged up with safe-haven flows counteracting the step down in rate expectations. NZD unwound yesterday’s spike generated by the larger RBNZ rate hike.• AUD/NZD lower. AUD/NZD hit a fresh 2023 low after the RBNZ announcement. We expect AUD/NZD to rebound over the medium-term. The RBNZ’s actions should lead to a meaningful NZ downturn. Markets have remained on the defensive overnight as US recession risks continue to build. US equities slipped back. The S&P500...

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04 Apr 2023

Rate expectations JOLTED

• Shaky sentiment. US equities and industrial metals eased back. The USD weakened, tracking the fall in US yields. EUR higher, USD/JPY lower.• US labour market turning. US JOLTS report weaker than expected. Tighter conditions are starting to work. But there is still a long way to go.• AUD underperformer. RBA pauses and waters down its guidance. RBNZ expected to hike by 25bps today, but could it also tweak its language? A more cautious tone across markets with US equities giving back some ground (S&P500 -0.6%), industrial metals easing (copper dipped ~0.9%), and US bond yields falling. US 2yr yields...

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04 Apr 2023

RBA: over and out

In what we think was a somewhat finely balanced decision the RBA finally ‘paused’ its rate hiking cycle at the April meeting. After raising rates aggressively since kicking things off in May 2022 (the RBA delivered a cumulative 350bps worth of hikes over the previous 10 meetings, the fastest and most abrupt tightening cycle since at least the 1980s), the RBA kept the cash rate steady at 3.6% for the second straight month. While the RBA held firm in April it has kept the door open to doing more down the track. However, further moves have become far more contingent...

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03 Apr 2023

The AUD’s energy price boost

• Oil spike. OPEC+ production cuts has seen oil prices lift. Oil sensitive currencies like the AUD, CAD, and NOK have outperformed.• USD lower. A weak US ISM manufacturing survey reinforced recession worries. US bond yields reversed course and this weighed on the USD.• AUD lift off. The terms of trade boost from higher energy prices has supported the AUD. RBA meets today. It is a close call, but we think the RBA will pause. A somewhat volatile start to the week for financial markets as investors digested the surprise weekend news that OPEC+ was cutting back oil production and...

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02 Apr 2023

Will the OPEC+ cuts reignite inflation worries?

• Positive vibes. Equities ended the week on a positive footing. Lower headline inflation in Europe and the US supported risk appetite. But core inflation, the focus for policymakers, remains high.• OPEC+ cuts. Weekend news the OPEC+ group is cutting production could reignite inflation concerns, and dampen risk sentiment early in the week.• AUD RBA focus. Will the RBA pause at tomorrow’s meeting? On net we think it will, but it is likely to be a closer call than many now think. Risk assets had another relatively positive session on Friday, with another day of no new negative news on...

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