Greenback Softens on US Credit Downgrade
AUD
The Australian Dollar opens higher against the majors ahead of the Reserve Bank of Australia's interest rate decision this afternoon. Some mixed data out of China yesterday, showing Retail Sales growth had slowed in April, missing expectations and only rising 5.1% from a year earlier. Industrial Production increased +6.1% y/y, exceeding expectations. Asian equities finished the day in the red as the Shenzhen and Hang Seng both shed -0.1% each, while the Nikkei closed -0.7%. Locally, the ASX 200 finished -0.6% as materials led losses. Commodities closed in the green with Gold and Silver both up 0.9%, and 0.2% respectively, while Iron Ore +0.2%, and Copper being the best performer +1.5%. It will be a busy day ahead with the first data release of note at 11am with China’s 1 and 5-y Loan Prime Rate, both expected to drop 0.10%. Domestically, the RBA will announce its policy decision today at 2:30pm with market expectations that the RBA Board will cut the cash rate by 25bps to 3.85%. It’s expected that the RBA will see downside risks to the economic outlook due to the increase in US tariffs and heightened global and domestic uncertainty. Recent domestic consumer and business survey data have also been a little softer. With underlying inflation sitting around the middle of the 2-3% target band over the past two quarters, some economists expect the central bank will see scope to ease policy. Commentary post decision will also be heavily monitored with expectations that the RBA will continue to describe policy as restrictive and Governor Bullock will be less likely to push back against market pricing.
USD
The AUDUSD opens higher at 0.6454 following three days of declines after the greenback weakened as markets digested a surprise downgrade of the U.S. government's credit rating. Moody's cut the United States' top sovereign credit rating by one notch, the last of the major ratings agencies to downgrade the country, citing concerns about its growing $36 trillion debt pile. A few members of the FOMC also spoke overnight, however, with nothing major to note, with Fed’s Williams stating recent economic data has been very good, and the key word for economy is uncertainty. Wall Street closed with the Dow Jones +0.3%, while the S&P 500, and Nasdaq both flat. It will be a relatively quiet week for US data with the next major release set for late Thursday evening with their Unemployment Claims, Flash Manufacturing PMI and Flash Services PMI.
EUR
AUDEUR opens higher this morning at 0.5746 after EU Spring 2025 Economic forecasts showed the EU Commission cut the Eurozone GDP growth forecast for 2025 to 0.9 from 1.3% in November. The growth outlook revised significantly downwards because of a weaker trade outlook and trade policy uncertainty. Eurozone equities closed with the DAX +0.7%, while the CAC remained flat. Quiet day for Eurozone releases with only German PPI m/m at 4pm and Current Account at 6pm, with both expected to move markets. Tomorrow night we will see the ECB Financial Stability Review, however, all eyes are focused on Thursday with Eurozone Flash Manufacturing, and Services PMI all set for release.
GBP
AUDGBP opens higher this morning at 0.4832 after yesterday’s Rightmove HPI m/m came through lower that previous at 0.6%. UK equities saw the FTSE +0.2%. Later this evening we will see MPC Member Pill Speaking at a Barclays briefing in London where audience questions will be expected, although there's no note on whether monetary policy will be mentioned. Tomorrow, we will get UK CPI y/y which is expected to rise sharply in April from 2.6% to 3.3% due to higher energy costs.
NZD
The AUDNZD opens flat at 1.0887 after yesterday’s PPI Input q/q and PPI Output q/q both came through much higher than forecast at 2.9%, and 2.1% respectively. The largest contributors being electricity, gas, water waste services, and manufacturing. No further news from our Kiwi neighbours today. Tomorrow, we will see their GDT Price Index, Trade Balance and Credit Card Spending y/y.