INDONESIA: VIEW: JP Morgan Adds Rate Cut As BI Pro-Growth
Bank Indonesia (BI) cut rates 25bp to 5.5%, in line with consensus but in contrast to JP Morgan’s expectation of a hold. BI was “more sanguine on FX” than it thought it would be. It has added a 25bp July rate cut to its forecast given slower GDP growth in H2 2025 “with the bias for more easing if the soft US$ environment holds”.
- JP Morgan believes “BI’s tone and rhetoric suggest that there may be one or two more rate cuts in store, and once again, the timing of those cuts is dependent primarily on real-time external financial conditions”, especially “if this soft US$ environment continues”.
- “BI is committed to a pro-growth stance. Rate cuts are not just a counter-cyclical response to spillovers from higher US tariffs, but also a means to deliver stronger domestic growth in coordination with fiscal policy. This implies a higher sensitivity to real-time economic data, especially if there are downside surprises.”
- There were some slight forecast revisions with 2025 global GDP growth increased 0.1pp to 3.0%, while Indonesia’s was shifted down 0.1pp to 4.6-5.4% following the disappointing Q1 result and heightened global uncertainty.
- BI “highlighted that the US$ has weakened against EM currencies (as opposed to only against DM currencies in the April MPC) and that the IDR remains stable and “tends to strengthen” on a trade-weighted basis. BI appears unperturbed by ongoing BOP pressures (e.g., weaker terms-of-trade) as it maintains its 2025 current account deficit forecast of 0.5-1.3% GDP, expectations of a decent financial account surplus, as well as a resilient international reserves position”.
- “Amid the slowdown in loan growth year-to-date, BI has also downgraded its 2025 credit growth target from the lower range of 11-13% to 8-11%. To increase credit distribution and boost economic growth, the central bank has explicitly guided for a further “lowering of interest rates” and an “expansion of bank funding sources”.”
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FOREX: Early USD Gains Not Sustained, USD/JPY Close To 140.00 Test
Earlier USD gains haven't been sustained, with the G10 currencies supported on dips so far today versus the USD. The BBDXY index was last near 1214, down around 0.15% for the session, but still above intra-session lows from Monday (near 1212).
- There hasn't bene an obvious catalyst for this turnaround in USD sentiment since this morning. US equity futures are still positive, albeit off earlier highs. Regional equity sentiment is mixed, but outperforming Monday's cash US falls (so hinting at further US asset market underperformance). US Tsy yields are little changed in latest dealings.
- Yen is the strongest performing G10 currency, with USD/JPY finding selling interest above 141.00. We track near 140.15/20 now, up 0.50% in yen terms. This is fresh lows in the pair back to September last year. Sep 16 lows from that period were at 139.58.
- EUR/USD is back up to 1.1535/40, just short of recent highs (1.1573). USD/CHF is back under 0.8100 but little changed for the session.
- AUD/USD is near 0.6430/35, eyeing Monday highs close to 0.6440, while NZD/USD is up to 0.6015/20.
AUD: AUDUSD Range Trading As Sentiment Stabilises, Fed Speak Later
AUDUSD approached 64c earlier in the APAC session but rebounded following a higher CNY fixing. The pair is now up 0.2% to 0.6427, close to the intraday high and just below resistance at 0.6428. Risk appetite appears to have stabilised with mixed equity and commodity prices, which is probably contributing to the narrow range in AUDUSD. After falling 0.7% yesterday, the USD index is flat but off today’s peak.
- Aussie is little changed against other major currencies, which it weakened against on Monday. AUDNZD is slightly higher at 1.0697 following a peak of 1.0706. AUDJPY is down 0.1% to 90.30 after rising to 90.58. AUDEUR is up 0.1% to 0.5579 but off today’s high of 0.5588 and AUDGBP is flat at 0.4796 after breaking above 0.4800 briefly.
- Equities are mixed with the S&P e-mini up 0.6% and KOSPI +0.1%, ASX & CSI 300 flat, but Hang Seng down 0.5% & TAIEX -0.8%. Oil prices are higher with WTI +0.7% to $62.85/bbl. Copper is up 0.6% but iron ore is below $99/t.
- Later the Fed’s Jefferson, Harker, Kashkari, Barkin and Kugler appear with the focus likely to be on any comments related to central bank independence. April Philly/Richmond Fed indices and preliminary April euro area consumer confidence print. The ECB’s de Guindos speaks.
AUSSIE BONDS: Richer On A Data-Light Day, Apr-29 Supply Tomorrow
ACGBs (YM +5.0 & XM flat) are mixed but sitting near Sydney session highs as trading resumes after the Easter weekend. The local calendar has been light today ahead of S&P Global PMIs tomorrow.
- Cash US tsys are slightly mixed, with a flattening bias, in today's Asia-Pac session after yesterday's long-end sell-off.
- Cash ACGBs are 2-7 bps richer with the AU-US 10-year yield differential at -14 bps.
- Swap rates are 1-5 bps lower, with the 3s10s curve steeper.
- The bills strip has bull-flattened, with pricing +1 to +5.
- RBA-dated OIS pricing is 1-8 bps softer across meetings today. A 50bp rate cut in May is given a 24% probability, with a cumulative 122bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- The AOFM plans to sell A$1000mn of the 3.25% 21 April 2029 bond tomorrow.
