FX Daily: Risk soured and the RBA isn't budging - Westpac

Analysts from Westpac are out with brief coverage of the new week's events following the Easter holidays, and heading into the Aussie Rate Statement due from the Reserve Bank of Australia (RBA).

Key quotes (Source: Westpac)

"US equities reopened from the Easter break in a sour mood, with technology stocks weakest but also concern over retaliatory tariffs by China on US goods. US bond yields fell and currencies generally followed the risk-off pattern, JPY strongest and AUD/USD dipping to 0.7650/60. Today’s calendar highlight is the RBA policy decision."

"European markets shared Australia’s 4 day Easter weekend but US markets reopened and fell steadily, the S&P 500 at one point down -3.3% before trimming losses somewhat into the close. This was still a closing low since 8 Feb. Possibly contributing to the moves were Monday’s the announcement from China of targeted tariffs on US imports (especially agricultural goods) and President Trump’s renewed criticism of Amazon."

"The US 10yr treasury yield fell from 2.77% to 2.72% - the lowest since 6 Feb. 2yr yields similarly fell from 2.29% to 2.23% - a one-month low. Fed fund futures continued to price two more hikes by end-2018, with the next being in June (78% chance)."

"AUD/USD also weakened on the US stocks slide though not dramatically, slipping from 0.7690 in Tokyo trade to 0.7650, not quite taking out Thursday’s low of 0.7643 which was the weakest level since December. NZD/USD fell from 0.7240 to 0.7215. AUD/NZD is about flat on the week so far, around 1.0620."

"There is again no tension over the RBA’s decision on its 1.5% cash rate (2:30pm Sydney). But the statement will be perused as always. There has been no update on inflation or wages since the March meeting but the slightly sub-consensus Q4 17 GDP reading came out a day after that meeting. Language on growth in the statement and minutes hinted at a slightly less bullish forecast for 2018 than Feb’s 3.25% (year to Dec 2018) so this will be the main focus."