Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
The Australian dollar was mostly weaker yesterday after the Reserve Bank of Australia meeting saw the central bank warn on higher than expected inflation, but not adjust its current policy stance.
Importantly, the RBA said: “The path of interest rates that will best ensure that inflation returns to target in a reasonable timeframe remains uncertain and the Board is not ruling anything in or out.”
In previous more hawkish statements, the RBA would signal the next move would likely be higher – the board declined to do so.
Otherwise, the RBA did admit to a shift in assumptions, raising its mid-year CPI target from 3.3% to 3.8%, and end 2024 forecast from 3.2% to 3.8%, but long-term assumptions remain the same, with December 2025 forecast remaining 2.6%. Like most economies, sticky services inflation remains the main concern.
The AUD/USD was weaker, turning from key resistance around 0.6650, to fall 0.4%.
In other markets, the US dollar was mostly stronger, regaining some of last week’s job-inspired losses. The USD/JPY climbed 0.5% while USD/SGD and USD/CNH both gained 0.2%.
German rebound not enough for euro
In Europe, the euro was also lower overnight, with the EUR/USD down 0.2%. The GBP/USD was also weaker, down 0.4%.
Looking forward, German industrial production, due at 4.00pm AEST, is expected to expand by 0.5% month-over-month in March, marking the third consecutive month of growth following a protracted period of contraction.
According to surveys, Germany’s manufacturing production appears to have been increasing. Furthermore, GDP growth in Q1 2024 surprised to the upside, which would indicate better-than-expected March numbers.
Nonetheless, there is a potential downside risk as a result of the 0.9% monthly reduction in motor vehicle manufacturing.
While European data has recently improved, expectations the European Central Bank might be able to cut rates in June have weighed on the euro.
We’ve seen the EUR decline across most markets over the last month with the most notable moves pushing the AUD/EUR up to four-month highs.
Taiwan exports boosted by tech tailwinds
From 18.9% in March, we anticipate that Taiwan export growth will slow to a still robust 17.8% y-o-y in April. The end-of-quarter push in March saw a seasonally large rise, so the first month of the quarter is probably going to be slower.
That being said, we anticipate a sequential increase (m-o-m) in tech exports, including chips, computers, and smartphones, throughout Q2, which would support high double-digit growth of exports in the upcoming months.
This is because we are entering a seasonally strong quarter and major tech companies are announcing their new AI chips and services.
Like other Asian FX markets, USD strength has seen the TWD recently fall to seven-year lows versus the greenback, and also weaken in other key markets.
AUD weaker in most markets after RBA
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 29 April – 3 May
All times AEST
*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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