AUSTRALIA DATA: Westpac On Australia's Q1 GDP Print

MNI Aus Economist - Monthly trimmed mean and headline data for March were unchanged from February at 2.7% y/y and 2.4% respectively. The latter was higher-than-forecast. The trimmed mean has been around 2.7% for four consecutive months now, which is consistent with the RBA’s projection that it could remain around this rate and not make any further progress towards the 2.5%-target mid-point in 2025. Given global developments though, the outlook remains highly uncertain. Bloomberg - “New Zealand business confidence fell to a nine-month low in April due to US President Donald Trump's tariff policies. ANZ Bank revised down its outlook for New Zealand's economic growth and expects the Reserve Bank to cut the Official Cash Rate to 2.5% this year from 3.5% currently.”

• AUD/USD - Asian range 0.6379 - 0.6407, the AUD got a quick 20/30 point boost from a higher than expected CPI. Momentum though has been stalling above 0.6400 the last few days. Watch the support around 0.6350 if this gives way, look for buyers to return back towards 0.6250.
• AUD/JPY - Asian range 90.75 - 91.21. Price goes into the London trading around 91.20, continues to trade sideways in a range of 0.8950/0.9200.
• NZDUSD - Asian range 0.5924 - 0.5945, going into London trading around 0.5930. Demand should return first around 0.5900, then around the 0.5800 area.
• AUD/NZD - Asian range 1.0744 - 1.0797, the cross has benefited from the AU CPI in the Asian session. Watch for supply to return on any bounce back towards the 1.0850 area.

Fig 1 : AUD/USD Spot Hourly Chart

Source: MNI - Market News/Bloomberg

RBA-dated OIS pricing is 2-4bps firmer across meetings after today’s Q1 CPI data.

• Q1 headline and underlying inflation printed 0.1pp higher than expected but the trimmed mean at 2.9% y/y is below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
• The data is close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
• A 50bp rate cut in May is given a 3% probability (10% before the data), with a cumulative 113bps (117bps before) of easing priced by year-end.

Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI

Source: MNI - Market News / Bloomberg

TYM5 has traded a little higher with a range of 112-04 to 112-09 during the Asia-Pacific session. It last changed hands at 112-06, up 0-01 from the previous close.

• The US 10-year yield is a little lower, dealing around 4.16%, down from its close around 4.1716%.
• The US 2-year yield is unchanged, dealing around 3.65%.
• US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light.
• “The trade deficit widened to a record in March, and consumer spending slowed, contributing to the GDP growth slowdown.”(per BBG)
• MNI Economist re GDP - “Domestic demand should look somewhat more robust but will be clouded by question marks over the extent to which areas of strength were driven by tariff front-running”.
• Month End flow will continue to be a key driver tonight.
• The 10-year Yield, has put in a lower high around 4.40% and has broken through the recent support around 4.25%. The next support is towards the 4.10 area which should find supply once more.
• Data/Events :  ADP private jobs data, GDP, Chicago PMI, PCE and Home Sales.