Headlines:
- RBA surprises with 25 bps rate hike; cash rate raised to 3.85%
- RBA's Lowe: Goal is to get inflation back to target range within a reasonable timeframe
- Eurozone April preliminary CPI +7.0% vs +7.0% y/y expected
- Eurozone March M3 money supply +2.5% vs +2.4% y/y expected
- Eurozone April final manufacturing PMI 45.8 vs 45.5 prelim
- Germany March retail sales -2.4% vs +0.4% m/m expected
- UK April final manufacturing PMI 47.8 vs 46.6 prelim
- UK April Nationwide house prices +0.5% vs -0.4% m/m expected
Markets:
- AUD leads, CAD lags on the day
- European equities lower; S&P 500 futures down 0.1%
- US 10-year yields down 3.8 bps to 3.535%
- Gold up 0.2% to $1,985.83
- WTI crude down 0.2% to $75.50
- Bitcoin up 1.5% to $28,073
The spotlight was supposed to be on the Eurozone CPI data today but the RBA just had to spring a surprise on markets, delivering a 25 bps rate hike. Kudos to CBA for getting that call right by the finest of margins.
But the rest of the market wasn't prepared for that and it was evident in the aussie price action after. AUD/USD saw a jump from 0.6630 to 0.6680 before extending gains to above 0.6700 and then hugging the figure level now with large option expiries also in play.
The surprise move shifted the RBA rates outlook significantly, as you can see here:
Broader markets were not affected too much though but there was a bit of a jump in European bond yields early on, as traders and investors in the region returned from the long weekend.
Major currencies were mostly little changed outside of the aussie up until we got to the Eurozone CPI data, which hinted at slightly softer core prices. That led to EUR/USD slipping from 1.0980 to 1.0950 as the dollar nudged a little higher across the board as well.
Bond yields also declined and that pulled down USD/JPY from the highs near 135.70 to 135.30-40 levels at the moment.
Elsewhere, GBP/USD is also seen down slightly by 0.2% to 1.2470 while USD/CAD is up 0.2% to 1.3570 with some pushing and pulling during the day.
Equities remain fairly tentative and with good reason, as all eyes continue to be fixated on the Fed decision tomorrow.
