AUDUSD TECHS: Bulls Remain In The Driver’s Seat

Weakness in U.S. e-mini futures, driven by Moody’s sovereign rating downgrade of the U.S. late on Friday, has applied pressure to European peers, pointing to a slightly negative start at the European cash equity open.

• Note that Euro Stoxx 50 futures near Friday’s lows and e-minis have traded to fresh session lows at typing.
• Euro Stoxx 50 futures -0.19%
• DAX futures -0.30%
• CAC 40 futures -0.17%
• FTSE MIB futures -0.20%
• FTSE 100 futures -0.39%

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• The RBA decision is announced on May 20 and a 25bp rate cut to 3.85% is widely expected (31/33 analysts on Bloomberg are forecasting -25bp with two expecting -50bp) after Q1 trimmed mean CPI fell within the 2-3% target band with activity, especially consumption, remaining lacklustre.
• The economy has broadly developed in line with the RBA's February expectations and thus forecast revisions this month are likely to be minimal.
• After stronger-than-expected Q1 wages and April employment data, the central bank is likely to retain its cautious tone though regarding the data-dependence of future easing and reiterate that uncertainty is very high.

• RBA-dated OIS pricing has a 95% probability of a 25bp rate cut in May, with a cumulative 75bps of easing priced by year-end.

   

Modest hawkish adjustments in GBP STIRs are a product of weakness in U.S. Tsys after Moody’s downgraded the U.S. late on Friday.

• BoE-dated OIS shows 1bp of cuts for next month, 16bp through August, 22bp through September, 36bp through November and 43bp through December.
• SONIA futures flat to -4.0.
• Late on Friday saw BoE Deputy Governor Deputy Governor Lombardelli note that the Bank is overhauling its communication methods via a shift away from its main inflation forecast toward multiple scenarios. Not market moving.
• Wednesday’s CPI data headlines the UK calendar this week. We have written a little on that in our global week ahead/late Friday bullets, expect more in our full preview.