INDONESIA: Country Wrap: BI Leaves Rates on HOLD

The ESM, Portugal and the EU are all still due to sell bills this week, while Germany, the Netherlands and France came to the market yesterday. We expect issuance to be E19.8bln in first-round operations, up from E18.1bln last week. 

• Today, the ESM will look to sell up to E1.1bln of the new 6-month Nov 20, 2025 bills.
• Tomorrow morning, Portugal will come to the market with a combined E1.25-1.50bln of the 6-month Nov 21, 2025 BT and the new 12-month May 22, 2026 BT.
• Finally tomorrow, the EU will look to issue up to E1.0bln of the 3-month Aug 8, 2025 EU-bill, up to E1.0bln of the 6-month Nov 7, 2025 EU-bill and up to E1.0bln of the 12-month May 8, 2026 EU-bill.

• RES 4: 5565.23 1.618 proj of the Apr 7 - 9 - 10 price swing   
• RES 3: 5516.00 High Mar 3 and the key bull trigger
• RES 2: 5471.00 High Mar 19 / 20
• RES 1: 5467.00 Intraday high 
• PRICE: 5452.00 @ 06:23 BST May 20 
• SUP 1: 5355.00 Low May 15                        
• SUP 2: 5251.88/5190.67 20- and 50-day EMA values 
• SUP 3: 5055.00 Low Apr 30        
• SUP 4: 4959.00/4812.00 Low Apr 23 / 16 and a key support  

A bullish theme in Eurostoxx 50 futures remains intact and price has traded to a fresh short-term cycle high. The contract is extending the recent breach of 5263.01, 76.4% of the Mar 3 - Apr 7 bear leg, and maintains the sequence of higher highs and higher lows. Sights are on 5516.00, the Mar 3 high and the key bull trigger. Initial firm support to watch lies at 5190.67, the 50-day EMA. Clearance of this level would signal a possible reversal.

The RBA cut rates 25bp to 3.85%, the lowest in two years, as was widely expected. The impact of current global uncertainty on economic decisions contributed to downward revisions to staff forecasts for GDP growth, inflation and employment but the outlook is significantly unclear. These downward adjustments, especially those bringing inflation closer to the band mid-point, gave the Board room to cut rates for a second time this year and opens the possibility of further easing depending on data and global developments but the RBA “remains cautious”.

• The decision to cut rates was made because Q1 trimmed mean CPI fell below the top of the 2-3% band, downward revisions to global growth and thus Australia’s resulted in lower employment gains and brought inflation closer to the band mid-point, of heightened uncertainty and a slower consumption recovery.
• The board noted that inflation risks were now “balanced” after being “on both sides” in April.
• Market OCR pricing used in forecasting was 20-30bp lower than in February and still drove a 0.1pp downward revision to underlying inflation bringing it to 2.6% across the horizon. Headline was adjusted to reflect not only softer growth but changes to the government’s electricity rebate but it now doesn’t exceed 3.0% helped by a materially lower oil price assumption.
• GDP growth was revised down 0.3pp in Q4 2025 to 2.1% as consumption is now forecast to grow 1.9% down from 2.6%. Business investment and exports are also lower while public demand and dwelling investment are now forecast to be higher. End-2026 GDP was little changed at 2.2% with stronger private consumption offsetting weaker public demand.
• The unemployment rate is forecast to peak 0.1pp higher at 4.3%, while employment growth was revised down 0.7pp to 2.1% in Q2 2025 (April +2.7% y/y) and -0.6pp to 1.4% y/y in Q4, but it reiterated that the labour market remains tight. Wages growth was revised 0.1pp lower across the horizon and productivity slightly higher.