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Global Market Update
The View from Australia

by Craig Killaby | April 27, 2021



> JP BOJ Monetary Policy Statement & Report : -0.10% v. -0.10% exp. (no change)

> US April CB Consumer Confidence : 121.7 v. 113.1 exp.

> US April Richmond Manufacturing Index : 17 v. 22 exp.


Overnight Headlines (BBG)

> US bond markets started to shift towards a rise in inflation expectations yet again, as surging commodities and vaccinations boosted sentiment

What you need to know

It was a relatively quiet session in terms of FX movements, while financial markets started to look ahead to higher inflation expectations yet again, as the surge in commodity prices continued. The lack of major data made for uneventful trading conditions, with the BOJ keeping policy on hold as expected and was essentially a non-event. Local equity markets oscillated between gains and losses to finish the day marginally down, while overnight the US S&P500 closed the session flat. The AUDUSD was unable to take and hold above the 0.7800 handle, with the inflation fears sparked from rising commodity prices were seen in bond markets as the 10y UST yield rose back to 1.6234% and up near 5.7bps on the session. The move higher in UST yields supported the Buck, which is up 0.1% in DXY terms. The AUD crosses are mostly down ahead of today’s local inflation read, a key impasse in the RBA’s path forward. As mentioned the story has been commodities, with Iron Ore and Copper up yet again, however the major story was WTI crude as it has been the laggard on the India fears it was able to recover near 1.9% on the day. Gold still unable to break through, down 0.2%.


The Day Ahead




> AU Q1 CPI & Trimmed Mean CPI : 0.9% & 0.5% exp.

> AU March Goods Trade Balance : -88.2Bio exp.

> EU April German GFK Consumer Climate : -4.1 exp.

> CA February Core Retail Sales & Retail Sales : 3.5% & 4.0% exp.

> EU ECB President Lagarde to speak

> US EIA Crude Oil Inventories : -0.9Mio exp.

> US FOMC Rate Statement/Decision & Press Conference (4am AEST) : <0.25% (no change)


Busy 24 hours for financial markets, with it all kicking off this morning as AU prints their first CPI read of 2021. The risk is that the number exceeds expectations and signals that the RBA may need to act prematurely to raise rates, however a miss may see those rate hike expectations kicked down the road and see both the AUD and local bond yields drift lower.


Overnight, ECB President Lagarde is on the cards while the Fed delivers their next decision and following press conference early tomorrow at 4am AEST. Not expected much change from the Fed, however with the vaccinations well on track the commentary on the state of the recovery will be watched. Potential of a Dollar surge cannot be ruled out, with 0.7700 vulnerable on anything less than extremely dovish.


Range for the day : 0.7700 – 0.7785


AUD/USD Technicals


The 0.7800 handle is proving to be tough sledding for the AUDUSD, with the pair reversing after testing the level early yesterday morning. Will need to see a close above that level to change the direction in a meaningful way, with 0.7849 the target on a break of 0.7816. 0.7722 and 0.7700 will be the key on bearish momentum, with 0.7690 leaving the door open to 0.7550.

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