US: Trump's '100 Days' Speech Underway Shortly

There are a lot of data this week but the focus will be on Tuesday’s RBA decision after it cut rates 25bp to 4.1%. Rates are forecast to be on hold on April 1 though given the cautiousness that surrounded February’s easing. Governor Bullock warned not to expect successive rate cuts and that the market was too optimistic as the AUD OIS trajectory didn’t bring underlying inflation back to the 2.5% mid-point of the target band over the forecast horizon.

• Retail sales for February print just before the RBA decision and are forecast to rise 0.3% m/m after 0.3%. This series will be replaced by household spending in July and the February data out on Friday is projected to rise 0.3% m/m to be up 3.2% y/y.
• Monday sees the Melbourne Institute’s inflation gauge for March which has been below 2.5% this year.
• The RBA’s private credit series for February are also on Monday and have shown robust growth. The RBA has questioned whether credit growth signals that policy is not as restrictive as it believes.
• March CoreLogic house prices are released on Tuesday. They returned to positive territory in February. On the housing front, building approvals for February are on Wednesday and is forecast to drop 1.5% m/m after rising 6.3%, but the data is volatile.
• Final March PMIs print this week with manufacturing on Tuesday and composite/services on Thursday. The preliminary readings signalled that growth improved in Q1.
• Q1 job vacancies are published on Thursday. Given the fall in employment in March and that the RBA watches this series, it is likely to be monitored for particular strength or weakness. SEEK job ads have been mixed in the quarter.
• Thursday also sees February trade data and Bloomberg consensus is expecting the surplus to narrow moderately to $5.4bn from $5.62bn. Exports have been gradually recovering but remain weak. January saw a sharp increase in shipments to the US likely to beat tariff deadlines. It will be interesting to see if that trend continued.

J.P. Morgan: "Auto tariffs elicited the expected sell-off in sector equities in partner countries, but the USD remained somewhat range-bound. We reckon that with the Fed on hold, the real-yield corroding effect of tariff-fueled inflation is blunting some of the USD’s natural anti-cyclical beta to RoW growth damage.
USMCA carve-outs suggest that the US administration is unwilling to impose pain on the domestic economy beyond a point, but the precedent of stacking sectoral tariffs portends harsher-than-expected tariff measures for RoW trade partners on April 2nd.
In isolation, auto tariffs should have limited FX impact assuming the USMCA carve-outs sustain, which should keep the direct hit to CAD and EUR FX manageable. JPY should strengthen at the margin as equity risk-off financial flows should overwhelm relatively small trade balance effects given that Japanese auto production is heavily offshored.

EUR/USD should be resilient against tariffs up to 10% or reciprocal/ sectoral tariffs as these are already accounted for in the growth outlook and would be offset by gains from fiscal spend…
…but would be vulnerable if tariffs are >10%. We estimate 20% tariffs would be worth 5% on EUR/USD (fair value ~1.0350), but markets will struggle to price this in fully given the lack of visibility on longevity; more realistic is a target of 1.06-1.0650 in this outcome as it reflects 50-60% odds of 20% tariffs will last.
Benign tariff delivery on April 2nd should sponsor USD weakness despite a squeeze higher in US stocks and a backup in bond yields, as the RoW should benefit more from a relief rally, and the aftermath could bear resemblance to the valley of the USD smile.
Appreciation pressures could resurface for some currencies if FX policy is deemed to be a steep non-tariff barrier for reciprocal tariff determination, but the lesson of Trump 1.0 is that such talk tends to quickly cool amid organic DXY weakness.
GBP avoided a UK budget scare ahead of a highly anticipated OBR forecast update. BoE implications of the delivered fiscal tightening are dovish at the margin but not enough to matter for FX; stay long EUR/GBP." 

Risk-sensitive Aussie and Kiwi underperformed the G10 on Friday as equities sold off driven by growing concerns around US inflation following higher-than-expected PCE price data. AUDUSD rose to a high of 0.6312 and then trended lower before stabilising between 0.6285/90. It fell 0.3% to finish at 0.6287, and has started today lower at 0.6281 following a WSJ report that US tariffs will be broader and higher. The USD index was down 0.1%. 

• The short-term bull theme in AUDUSD remains and Friday’s drop appears corrective. Initial support is at 0.6258 but clearance of 0.6187 is needed to reinstate a bear threat. Initial resistance is at 0.6391 and the bull trigger at 0.6409.
• The yen outperformed driven by weaker US equities leaving AUDJPY down 1.1% to 94.21, after a low of 94.10. It is currently around 94.05.
• The euro was also an outperformer resulting in AUDEUR falling 0.5% to 0.5806. It is currently around 0.5808. AUDGBP is down 0.2% to 0.4858. 
• AUDNZD broke above 1.1000 and made a high of 1.1013 before hovering around 1.1000 again. It is now around 1.0996.
• Equities sold off with the S&P down 2% and Euro stoxx -0.9% but FTSE only 0.1% lower. Oil prices fell with Brent -0.9% to $73.38/bbl. Copper is down 0.2% and iron ore around $103/t.
• Today the Melbourne Institute inflation gauge for March and February private credit are released. The focus of the week will be on Tuesday’s RBA decision.