Aussie lower as markets await RBA restructure

Global markets remain cautious on Fed fears

Financial markets remained cautious overnight with US equities drifting lower and the Australian and New Zealand dollars also pressured.

Growing expectation that the US Federal Reserve will need to lift official interest rates from 5.00% to 5.25% has weighed on risk sentiment and boosted the US dollar.

Overnight, US shares recovered from earlier losses. The US’s Dow Jones fell 0.2% while the S&P 500 fell 0.1%.

The AUD/USD fell 0.1% as it neared one-week lows while the NZD/USD also fell by 0.1% but neared one-month lows.

The euro and British pound were both stronger after hot inflation readings in the Eurozone and UK caused markets to look to further rate hikes in these areas.

Eurozone headline annual inflation was reported at 6.9% in March while UK remained red-hot and still in double digits at 10.1%.

RBA restructure due

The focus in Australia today moves way from the AUD and to the long-awaited restructure of the Reserve Bank of Australia.

Australian treasurer Jim Chalmers announced an enquiry into the RBA just after the Labor government’s election win in May last year, with the report handed to the government last month.

Today, Chalmers will announce a major restructure of the bank, saying he supports all 51 recommendations from the report, including the introduction of a second board of economists and academics to handle monetary policy.

RBA governor Philip Lowe speaks on the announcement at 12.00pm AEST.

NZ inflation key for kiwi

Earlier, all eyes are on NZ inflation, due at 8.45am AEST.

NZ’s headline inflation is forecast to remain heightened in the March-quarter – with an increase from 1.4% to 1.7% expected.

Annual inflation is forecast to remain broadly steady as it falls from 7.2% to 7.1%.

NZ’s heightened inflation might justify the Reserve Bank of New Zealand’s decision to hike rates by 50 basis points earlier in the month at a time when most other central banks were scaling back rate hikes.

The RBNZ might still have more work to do with financial markets seeing a 75% chance of a 25bps hike at the bank’s 24 May meeting (source: Refinitiv). A weaker CPI number today might scupper these expectations and pressure the NZD.