MNI US OPEN - RBA Cuts 25bps, Considered 50bps
EXECUTIVE SUMMARY
- RBA CUTS CASH RATE 25BPS TO 3.85%
- INDIA EXPECTS MULTI-PHASE TRADE DEAL WITH US AS TALKS PROCEED
- JAPAN’S KATO PLANS BESSENT MEET TO DISCUSS TOPICS INCLUDING FX
- CHINA GIVES EU BUSINESS GROUPS HIGH-LEVEL MEETINGS TO BOOST TIES
Figure 1: Germany PPI ex-Energy Highest Since May 2023
NEWS
RBA (MNI): RBA Cuts Cash Rate to 3.85%
The Reserve Bank of Australia board cut the 4.10% cash rate by 25 basis points to 3.85% on Tuesday, citing substantially lower inflation and an uncertain outlook for the domestic economy. "While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago," the board noted in its statement following the decision. "There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected. Alternatively, labour market outcomes may prove stronger than expected, given the signal from a range of leading indicators."
RBA (MNI): Board's Dovish Turn Included Debate of 50bp Cut
The Reserve Bank of Australia board considered a 50-basis-point cut to the 4.1% cash rate before unanimously opting for a 25bp reduction, Governor Michele Bullock told reporters Tuesday, warning that a larger move may be warranted in future depending on the impact of global economic uncertainty. “The board was of the view that 25bp was the right number on this occasion,” she said, noting the reduction would likely have occurred due to domestic data regardless of the international environment. “With inflation in the band and also employment doing pretty well, we think there is a bit of scope to lower interest rates. And then if you add the international uncertainty… risks have actually balanced up a bit with more of the downside coming into play."
US/INDIA (BBG): India Expects Multi-Phase Trade Deal With US as Talks Proceed
India is discussing a US trade deal structured in three tranches and expects to reach an interim agreement before July, when President Donald Trump’s reciprocal tariffs are set to kick in, according to officials in New Delhi familiar with the matter. The interim deal will likely cover areas including market access for industrial goods, some farm products and addressing some non-tariff barriers, such as quality control requirements, the people said, asking not to be identified because the discussions are private.
US/JAPAN (BBG): Japan’s Kato Plans Bessent Meet to Discuss Topics Including FX
Japan’s Finance Minister said he’s arranging a bilateral meeting with US Treasury Secretary Scott Bessent this week to discuss topics including currency matters, triggering further gains in the yen. “We are currently working on setting a date for the meeting with Secretary Bessent,” Katsunobu Kato told reporters on Tuesday. The talks are expected to take place in Canada, where Kato will attend a meeting with his Group of Seven counterparts. “I hope to discuss various issues with the US including foreign exchange.” Kato noted that the conversation will build on the two countries’ existing agreement that exchange rates should be determined by the market and that excessive volatility can have adverse effects.
US (WSJ): Divided GOP Closes In on Tense House Vote
House Republicans set course Monday for a midweek vote on passing President Trump’s agenda of tax cuts and spending reductions, giving them just days to work out deep disagreements among members of their fractious conference. They are banking on the president to help them. Trump, who has urged lawmakers to get on board, on Monday met with GOP lawmakers one-on-one and is planning to speak to the broader House Republicans conference on Tuesday morning on Capitol Hill, according to people familiar with the matter. The House Rules Committee is planning to meet shortly after midnight Wednesday morning to try to then send the package later that day to the House floor.
ISRAEL (NYT): Israel Wavers as Far Right and Military Disagree on Gaza Strategy
For months, Israel has tried to pressure Hamas by both threatening a major new ground offensive in Gaza and simultaneously cutting off aid to the territory. On Monday, Israel made a U-turn on aid, allowing a few trucks of food to enter Gaza. And despite escalating its rhetoric and its airstrikes on Gaza in recent days, the Israeli military had yet to begin the long-awaited major advance that would involve thousands of ground troops. The lack of strategic clarity reflects disagreements within its leadership about Israel’s national priorities.
IRAN (MNI): Khamenei Talks Down US Deal Despite 5th Round of Talks in the Works
Speaking at an event commemorating the late hardline conservative President Ebrahim Raisi, Supreme Leader Ayatollah Ali Khamenei says: "Of course, there were indirect negotiations [with the US] during [Raisi's] time, as there are now, but without results. We don't expect them to yield results now either. We don't know what will happen." Khamenei: "Talking about negotiations, I would like to give a warning to the other side. The American side that is entering into these indirect negotiations should talk, negotiate, and try not to talk nonsense." Regarding calls from US officials for Iran to halt its nuclear enrichment programme, Khamenei adds: "To say that we will not allow Iran to enrich uranium is a big mistake. No one is waiting for permission for this or that. The Islamic Republic has a policy, it has a method, it follows its own policy."
EU/RUSSIA (MNI): Foreign Ministers Set to Approve 17th Sanctions Package
Speaking ahead of a meeting of defence ministers in Brussels, Germany's Boris Pistorius says that following the two-hour call between Russian President Vladimir Putin and US President Donald Trump on 19 May, that Putin "is clearly playing for time" and is not serious about a ceasefire deal. Says that the EU "must further tighten the screw of sanctions on Russia". Pistorius says that the "most effective sanctions against Russia would be further cutting the flow of money from energy sales." A post meeting presser is due to take place at 1745CET (1145ET, 1645BST). EU foreign ministers also meet today, where they are expected to approve the 17th package of sanctions against Russia. EU High Representative for Foreign Affairs and Security Policy Kaja Kallas says the latest round will be approved today.
ECB (BBG): ECB Sees Financial Stability Risks From Global Trade Tensions
The European Central Bank warned that escalating global tariff tensions have emerged as a “significant concern” for financial stability and the global economy. “Policy authorities need to identify the risks stemming from trade tensions, monitor them and evaluate their potential impact on financial stability,” six staff economists wrote in a note published on Tuesday that will feature in a bigger risk report scheduled for Wednesday.
EU/CHINA (BBG): China Gives EU Business Groups High-Level Meetings to Boost Ties
China is giving European business leaders its warmest welcome in years, in an effort to strengthen ties as Beijing seeks to counter Donald Trump’s tariff pressure and stabilize its slowing economy. The Chinese government in recent weeks has offered delegations rare, unscripted access to senior policymakers and showered them with assurances of improved conditions, according to European business groups. “They rolled out the red carpet for us,” said Inaki Amate, chairman of the European Chamber of Commerce in Hong Kong. In March he led a delegation to Beijing, where he was invited to lunch by Xia Baolong, China’s top official for Hong Kong and Macau affairs, and met with Hua Chunying, the Foreign Ministry’s vice minister.
BOE (MNI): Summary of Pill's Opening Remarks
He sees May as a skip, but seems to still broadly support quarterly cuts. He thinks that the MPC started cutting too early - remember that he voted against the first cut in August 2024 (along with Mann, Greene and Haskel). He partly sees as his vote for a skip to make up for that. He again used the word "cautious" rather than "careful". This has become a buzzword with the MPC and is a stronger word than "careful". He still believes that disinflation is in process, but that there has been greater intrinsic inflation persistence - and this has changed the character of disinflation. He notes that the MPC has consistently underestimated inflation persistence, wage growth and the inflationary cost push shocks. He doesn't think there has been enough data yet to assess whether there has been a structural break in inflation persistence.
CHINA (MNI): China May LPR Down 10bp
MNI (Beijing) China's Loan Prime Rate was reduced by 10bp on Tuesday, in line with expectations following the People’s Bank of China’s recent cut to the 7-day reverse repo rate. According to a PBOC statement, the LPR was cut to 3% for the one-year maturity and 3.5% for the five-year and over rate. Both were previously lowered in October by 25 basis points – the largest cuts since the LPR pricing mechanism reform in 2019. The central bank lowered the 7-day reverse repo rate – its benchmark policy rate – 10bp to 1.4% on May 8, followed by a 50bp reduction to the reserve requirement ratio on May 15.
CHINA (MNI): China to Launch Most Pro-Growth Policies by June
MNI (Beijing) China will launch most of its policy measures to stabilise employment and economic growth by the end of June, Li Chao, spokesman of the National Development and Reform Commission told reporters Tuesday. The NDRC will continue to strengthen policy reserves and improve the policy toolbox to ensure timely introduction when needed, said Li. The Commission will issue a list of all national major construction projects for this year by end-June, as well as 2025 urban renewal projects using the central government investment budget.
CHINA (MNI): China State Banks Cut Deposit Rates
MNI (Beijing) China’s six major state-owned banks announced reductions to their yuan deposit interest rates on Tuesday, state-media outlet People’s Daily reported. Interest rates for fixed-term deposits of three and five years have been reduced by 25 basis points to 1.25% and 1.3%, the daily said. China's Loan Prime Rate was reduced by 10bp on Tuesday, in line with expectations following the People’s Bank of China’s recent cut to the 7-day reverse repo rate.
CHINA (FT): China’s Battery Leader CATL Surges on Debut in Biggest Listing of 2025
Shares in leading Chinese battery maker CATL rose 12.6 per cent as trading began on Tuesday and retail investors followed up with strong demand for the biggest listing of the year to date globally. The secondary offering in Hong Kong raised at least $4.6bn, with the amount set to rise to $5.3bn if an option allowing underwriters to sell more shares than planned is exercised. It is among the largest-ever offerings in Hong Kong by Chinese companies already listed on the mainland, with CATL also quoted in Shenzhen.
BOJ (BBG): BOJ Finds Wide Range of Views on Bond Buying Reduction Plans
Market participants were widely split in their opinions on how fast the Bank of Japan should roll back its purchases of government bonds, with views ranging from those urging an acceleration of cutbacks to others advocating for slowdown. Reference material released Tuesday by the BOJ showed that some recommended speeding up cutbacks, citing the BOJ’s vast bond holdings and the distortion that causes to the yield curve. Others said the bank should slow its purchases, noting that the reductions may be worsening liquidity.
MNI: G7 Finance Not Seen Changing FX Text - European Officials
MNI looks at how the upcoming G7 communique will refer to FX markets.- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
DATA
GERMANY DATA (MNI): PPI ex-Energy Highest Since May 2023, Chinese Rerouting Focus Ahead
German PPI fell by 0.9% Y/Y in April, below consensus of 0.6% Y/Y and March's -0.2% Y/Y. Consistent with German CPI in April, energy deflation was more prominent than
before, at -6.4% Y/Y (vs -3.6% prior) - that was main downside contributor this time, Destatis adds. That leaves ex-energy PPI higher vs March, at 1.5% Y/Y - the highest rate since May 2023. Looking at the non-energy categories, non-durable goods stand out with a 3.2% Y/Y rate. Destatis flags some high-inflation food items in conjunction with the category.
FOREX: AUD Slips as RBA Considered Jumbo Rate Cut
- AUD is slipping against all others in G10 following the RBA rate cut to 3.85%. While the rate cut itself was expected, Bullock's more assertive language on easing ahead has pressured the front-end of the curve. The RBA disclosed that a 'jumbo' rate cut of 50bps was discussed - signaling the bank's approach to inflation is less restrictive than expected. As a result, AUD/USD has retreated away from any test of the 200-dma of 0.6452, reverting to the lower-end of the recent range in the pair.
- An uptick in oil prices has helped support commodity-tied currencies. Comments from Iran's Khamenei talked down the prospects of progress with the US in nuclear negotiations. Khamenei stated he does not believe talks with the US will yield any results - supporting Brent crude to briefly trade back to yesterday's highs. As a result, NOK is outperforming most others in G10.
- Broad EUR and GBP strength that played out across Monday has faded somewhat, however GBP/USD remains well toward the upper-end of the week's range. GBP/USD holds above 1.3350, but is yet to make any material challenge on the weekly high of 1.3404.
- Canadian CPI for April is the data highlight Tuesday, at which markets look for Y/Y CPI to slow to 1.6% from 2.3% previously. The Atlanta Fed's financial markets conference continues, while appearances are also due from Fed's Bostic, Barkin, Collins, Musalem and Kugler. Knot & Cipollone represent the ECB.
BONDS: Long-End Gilts Outperform Bunds Despite 30-Year Syndi
German and UK yields are biased lower this morning, with the German curve lightly bull steepening and the Gilt curve bull flattening. Those dynamics come despite today’s syndicated launch of the new 5.375% Jan-56 gilt. Books are now closed and final terms have been set for the syndication, with the GBP4bln size smaller than MNI's expectations.
- The 10-year Gilt/Bund spread has tightened 2bps to 205.5bps this morning, but there hasn’t been an overt driver of the UK outperformance.
- The reaction to UK Chief Economist Pill’s opening remarks was relatively contained. Although Pill thinks the MPC started easing too early, he viewed May as the appropriate moment for a skip and seems to still broadly support quarterly cuts going forward.
- In the EGB space, Germany will sell green Bunds at 1030BST while Finland will issue RFGBs at 1100BST.
- Bund futures are +4 ticks at 130.58, off earlier session highs of 130.75. Gilt futures are +30 at 91.80, from a high of 91.91.
- Following a record high merchandise trade surplus ahead of US Liberation Day, the Eurozone seasonally adjusted current account surplus rose to E50.9bln in March (vs an upwardly revised E40.6bln prior). German April PPI was weaker-than-expected, but more interest will be in the flash Eurozone May consumer confidence reading at 1500BST.
- In the UK, focus remains on tomorrow’s April CPI report. MNI’s preview will be released later this morning.
EQUITIES: Eurostoxx 50 Futures Hit New Short-Term Cycle High
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. A bullish trend condition in S&P E-Minis remains intact and the contract is holding on to its latest gains. An important resistance at 5837.25, the Mar 25 high and a bull trigger, has been cleared. This strengthens the current bullish theme, and paves the way for a continuation near-term. Sights are on the 6000.00 handle next. Initial firm support to watch lies at 5693.1, the 50-day EMA.
- Japan's NIKKEI closed higher by 30.86 pts or +0.08% at 37529.49 and the TOPIX ended 0.44 pts higher or +0.02% at 2738.83.
- Elsewhere, in China the SHANGHAI closed higher by 12.895 pts or +0.38% at 3380.478 and the HANG SENG ended 348.76 pts higher or +1.49% at 23681.48.
- Across Europe, Germany's DAX trades higher by 21.61 pts or +0.09% at 23956.04, FTSE 100 higher by 43.22 pts or +0.5% at 8742.63, CAC 40 up 9.97 pts or +0.13% at 7893.62 and Euro Stoxx 50 up 6.74 pts or +0.12% at 5434.06.
- Dow Jones mini down 75 pts or -0.17% at 42810, S&P 500 mini down 20 pts or -0.33% at 5962.5, NASDAQ mini down 92.5 pts or -0.43% at 21433.75.
Time: 09:50 BST
COMMODITIES: Corrective Cycle in Gold Still in Play, Price Close to Recent Lows
A downtrend in WTI futures remains intact and recent gains are considered corrective. Key resistance to watch is $62.90, the 50-day EMA. It has recently been pierced, a clear break of it would highlight a stronger reversal. This would open $65.82, the Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. Clearance of this support would confirm a resumption of the downtrend. A bearish corrective cycle in Gold remains in play and price is trading closer to its recent lows. A key support at $3202.0, the May 1, low has been breached. The break of this level signals scope for a deeper retracement, towards $3085.0, 76.4% of the Apr 7 - Apr 22 upleg. Note that the 50-day EMA at $3171.7, has also been breached, strengthening a bearish threat. Initial resistance is $3256.6, the 20-day EMA.
- WTI Crude up $0.48 or +0.77% at $63.17
- Natural Gas up $0.04 or +1.28% at $3.154
- Gold spot down $0.36 or -0.01% at $3229.62
- Copper down $5.7 or -1.22% at $461.2
- Silver up $0 or +0.01% at $32.369
- Platinum up $9.62 or +0.96% at $1011.59
Time: 09:50 BST
| Date | GMT/Local | Impact | Country | Event |
| 20/05/2025 | 1000/1200 |  EU | ECB's Cipollone pre-rec video at Sustainability Festival | |
| 20/05/2025 | - | EU | ECB's Lagarde and Cipollone at G7 Meeting | |
| 20/05/2025 | 1230/0830 | *** |  CA | CPI |
| 20/05/2025 | 1230/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 20/05/2025 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 20/05/2025 | 1300/0900 | US | Richmond Fed's Tom Barkin | |
| 20/05/2025 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 20/05/2025 | 1700/1300 | US | St. Louis Fed's Alberto Musalem | |
| 20/05/2025 | 2100/1700 | US | Fed Governor Adriana Kugler | |
| 20/05/2025 | 2300/1900 | US | San Francisco Fed's Mary Daly | |
| 20/05/2025 | 2300/1900 | US | Atlanta Fed's Raphael Bostic | |
| 20/05/2025 | 2300/1900 | US | Cleveland Fed's Beth Hammack | |
| 21/05/2025 | 2301/0001 | * |  GB | Brightmine pay deals for whole economy |
| 21/05/2025 | 0600/0700 | *** | GB | Consumer inflation report |
| 21/05/2025 | 0900/1000 | ** | GB | Gilt Outright Auction Result |
| 21/05/2025 | 1100/0700 | ** | US | MBA Weekly Applications Index |
| 21/05/2025 | 1430/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 21/05/2025 | 1600/1800 | EU | ECB's Lane at Monpol Panel Discussion | |
| 21/05/2025 | 1615/1215 | US | Richmond Fed's Tom Barkin, Fed Gov. Michelle Bowman | |
| 21/05/2025 | 1700/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
