RBA Defies Markets, AUD Jumps
AUD
The Aussie Dollar received a lift when the Reserve Bank of Australia defied market expectations by keeping the cash rate on hold at 3.85% yesterday. Future markets had priced in 90+% odds of a 25bps cut, with the vast majority of economists also taking this view, yet the central bank opted to hold out until the August meeting, with the board deciding that 'it could wait for a little more information' to confirm “inflation remains on track to reach 2.5% on a sustainable basis.” Governor Michele Bullock also flagged concerns around rising costs in home construction and durable goods, which will be key areas to watch in the next CPI release. Quarterly inflation will print at the end of July. The ASX finished a touch higher with consumer staples the largest mover, down -1.4%. Asian equities finished the day stronger, the Nikkei +0.3%, Hang Seng +1.0% and Shenzhen +0.9%. A couple of RBA members will be speaking today. We'll also see China's CPI and PPI reports. CPI is expected at -0.1% year-on-year. Deflation remains evident in producer prices, expected at -3.2% year-on-year. The last time producer prices were higher on a y/y basis was in September 2022.
USD
AUDUSD traded 1.1% range yesterday, between 2-week lows of 0.6485 and 0.6557, with the pair getting a boost from the RBA's unexpected interest rate hold in the afternoon. Further comments from U.S. President Trump on tariffs had little impact on Wall St. and saw the Nasdaq and the S&P 500 both close unchanged, while the Dow Jones closed -.3%. Trump flagged possible tariffs of 200% on pharmaceuticals and 50% on copper, with copper gaining 17%, the largest daily gain in over three decades. He also indicated that the EU would receive a trade letter within the next few days and said that the BRICS countries were trying to destroy the dollar. Little economic data over the next 24 hours. Early tomorrow morning, the FOMC Meeting Minutes will be released. Tariff talks will likely continue to dominate markets.
EUR
AUDEUR has soared back from the 10-week lows seen on Monday (0.5525), with the pair bolstered by yesterday's surprise interest rate hold from the RBA, opening today at 0.5567. The DAX and CAC each gained +0.6%. The Euro weakened a little on the back of Trump's 25% tariff announcement on South Korea and Japan, seeing the USD strengthen. Little Eurozone data for the remainder of the week.
GBP
AUDGBP reclaims the 0.48 handle, touching 0.4821 highs on the back of the surprise RBA interest rate hold yesterday, opening today at 0.4803. The FTSE gained +0.5% yesterday. This evening, we'll see the Bank of England Financial Stability Report, FPC Meeting Minutes and FPC Statement. Tomorrow, the monthly UK GDP figure is expected to be released at +0.1%.
NZD
AUDNZD opens at 6.5-week highs of 1.0887, gaining 0.4% when the RBA held rates yesterday. Today, the RBNZ will release the Official Cash Rate decision and Rate Statement. The central bank is expected to hold the key interest rate at 3.25% after six consecutive cuts. The RBNZ recently hinted that it is close to the end of its easing cycle as 'inflation is within the target band'.