US: President Trump To Deliver Remarks Shortly

Australia recorded a merchandise trade surplus of $1.79bn in April after March’s $1.02bn deficit but the trend remains downward. There was a strong rise in export values of 7.2% m/m while imports were more muted up 0.8% m/m following March’s strong receipt of data centre items. 

Australia merchandise trade surplus A$mn

Source: MNI - Market News/ABS

• Annual export growth improved to 7.2% from -2.5%, the best since June 2022. Rural and non-rural export growth was positive up 4.4% m/m and 11.0% m/m respectively. Non-rural posted positive annual growth at 5.2% for the first time in 6 months mainly boosted by metal ore and mineral shipments but also other major commodities. 

Australia goods exports y/y% 3-mth ma

Source: MNI - Market News/ABS

• The value of gold exports and imports fell in April as global prices declined on inflation worries related to the Iran War.
• Goods imports rose 0.8% m/m due to fuel imports (+41.4% m/m) which were boosted by higher prices and quantities of diesel. Consumer good receipts fell 1.6% m/m & 2.1% y/y while capital goods were down 16.4% m/m but still up 12.2% y/y. March saw a strong 29% m/m rise due to data centre investment which also boosted Q1 machinery & equipment investment. There was payback in April with ADP equipment down 41.7% m/m and telecoms 18% m/m.
• Consumption imports were mixed with food and transport equipment rising but clothing & footwear, toys & books, household electrical and other items all falling.

The RBNZ delivered a finely balanced decision on 27 May, with the Monetary Policy Committee split 3–3 between holding rates and raising the OCR by 25bp. Governor Breman cast the deciding vote in favour of a hike. Updated forecasts showed the Bank expects the OCR to average 2.51% in Q3 2026, implying a meaningful probability of further tightening over the coming year. 

• The following day, Governor Breman appeared before Parliament's Finance and Expenditure Committee, where she indicated the OCR is likely to rise at “coming meetings”, although she declined to commit to a specific timetable.
• The market has brought forward RBNZ tightening expectations, with the key question now appearing to be the pace rather than the direction of policy.
• RBNZ-dated OIS pricing currently implies around 23bp of tightening by the July meeting.
• By contrast, RBA Governor Bullock recently noted that three consecutive rate hikes have provided the Board with “space” to assess incoming data and developments. The comments suggest a pause at the 16 June meeting is the most likely outcome.
• Accordingly, after a period of relatively aggressive tightening by the RBA, markets are now anticipating a faster catch-up by the RBNZ. This expectation is reflected in the steepness of the NZ-AU bank bill futures spread curve.

Figure 1: Bank Bill Futures Spread Curve – NZ Vs. AU

Source: Bloomberg Finance LP / MNI

The USD is tracking a little lower in the first part of Thursday trade. The BBDXY index is back under 1205, so has backed away from an upside test above 1206 for now. Oil futures are lower, off around 1%, while US equity futures are also down, but have pared losses. Headlines around a Israel-Lebanon ceasefire have aided the oil move at the margins, while the US WSJ also reported on Trump's reported reluctance to re-engage in all-out war with Iran again (outside of fresh US troop causalities). This may also be aiding these moves. The WSJ noted: "The president's reluctance to reignite the war suggests he might be willing to withstand smaller flare-ups for weeks -- or even months -- to avoid a broader conflict in the Middle East." 

• NZD and SEK are both outperforming slightly, up around 0.15-0.20% versus the USD. This follows more than 1% falls for these currencies in Wednesday trade.
• NZD/USD was last near 0.5870/75, so still sub 0.5900. Data wise, Q1 volume of building work done fell sharply but the series is prone to large revisions. The print also didn't impact NZD sentiment.
• AUD/USD is a little higher to 0.7130/35, but is lagging the NZD move a touch. In Australia, the April trade balanced rebounded, but the print was close to market forecasts. Later on we have the RBA's Bullock before parliament.
• USD/JPY is little changed, last holding just under 159.90.