Headlines:

• A slight setback for the aussie on the RBA decision
• RBA leaves cash rate unchanged at 4.35%, as expected
• RBA’s Bullock: Rates are at the right level to get inflation back to target
• RBA’s Bullock: We might have to hike rates if inflation takes markedly longer to fall
• BOJ governor Ueda says had regular exchange of views with Japan PM Kishida
• Japan business federation chairman says USD/JPY above 150 is too much
• Eurozone March retail sales +0.8% vs +0.7% m/m expected
• Germany March industrial orders -0.4% vs +0.4% m/m expected
• Germany March trade balance €22.3 billion vs €22.2 billion expected
• Germany April construction PMI 37.5 vs 38.3 prior
• France March trade balance -€5.5 billion vs -€5.2 billion prior
• UK April construction PMI 53.0 vs 50.2 expected
• UK April Halifax house prices +0.1% vs -1.0% m/m prior

Markets:

• NZD and USD lead, JPY lags on the day
• European equities higher; S&P 500 futures flat
• US 10-ear yields down 2.6 bps to 4.463%
• Gold down 0.3% to $2,315.42
• WTI crude down 0.3% to $78.24
• Bitcoin up 0.9% to $63,848

The RBA policy decision was the main highlight in the handover from Asia to Europe today. The central bank did not produce a hawkish tilt, keeping a more or less similar stance to March. They did continue to leave the door open for rate hikes though, so that is limiting any major fallout in the aussie.

AUD/USD fell from 0.6625 to 0.6600 on the decision before easing slightly more to 0.6590 amid a steadier dollar. But the pair is now trading back to 0.6605, down 0.3% on the day.

Meanwhile, USD/JPY was hovering around 154.60 after rising in Asia trading before slipping to 154.00 during the session. The pair did bounce back though, now seen around 154.40-50 levels – up 0.4% on the day.

Besides that, the dollar held steadier in general throughout with little else to work with. EUR/USD is stuck within a 20 pips range, keeping little changed at 1.0760 levels mostly. Then, GBP/USD is down 0.2% to 1.2540 and USD/CAD up 0.1% to 1.3680 on the day.

In the equities space, European stocks are benefiting further from the Wall Street rally yesterday. But US futures are more muted, keeping flattish as we look towards US trading later.

In other markets, bond yields are staying in retreat while gold is also marked down slightly amid more of a push and pull this week for the precious metal.

This article was written by Justin Low at www.forexlive.com.

The S&P 500
has been rising steadily since last week due to a more dovish than expected
FOMC decision where the Fed decided to signal a bigger QT taper beginning in
June and the Fed Chair Powell pushing back repeatedly against rate hike
expectations. Moreover, the data on Friday
showed that the Fed might indeed just keep rates higher for longer as job and
wage growth soften. All of the above is supportive for the market in the short
term as the hawkish positioning unwinds a bit.

S&P 500
E-mini Futures Technical Analysis – Daily Timeframe

On the daily
chart, we can see that the bigger correction into the 4834 level might have
been invalidated for the time being. The S&P 500 bounced around the 5000
level as we got two positive catalysts from the FOMC decision and the softer US
NFP data. The path of least resistance remains to the upside with new all-time
highs in sight.

S&P 500
E-mini Futures Technical Analysis – 1 hour Timeframe

On the 1 hour
chart, we can see that the price broke out to the upside following the softer
US NFP report and after a retest of the 5120 zone, continued higher with the
buyers piling in with more conviction. If we get a pullback, the 5167 level
might be the first support for a dip-buying opportunity.

Upcoming
Catalysts

This week is pretty bare on the data front with just the US
Jobless Claims on Thursday and the University of Michigan Consumer Sentiment
survey on Friday being the only notable releases. It’s unlikely that they will
change the market’s expectations that much, so the price action might remain
tentative heading into the US CPI next week, although the bias should remain
bullish.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

The turnaround came as traders are starting to digest a more dovish Fed outlook since last week. We’ve gone from seven rate cuts priced in to start the year down to one rate cut, before moving towards two rate cuts now. To be more exact, Fed funds futures are reflecting ~45 bps worth of rate cuts currently for 2024. It was roughly 31 bps just at the start of last week.

And that has helped to keep a modest bid in bonds, with Treasury yields now down to its lowest in a month. So, have we reached the peak in yields for this year?

Well, higher yields wasn’t supposed to be part of the script to begin with. So, to see 10-year yields hit 4.70% at the end of last month was already a big win for bond sellers. But not everyone is abandoning that view as of yet, even with the recent poor US data. The bond king himself is arguing for yields to move to 5% next, rather than 4%.

That being said, there’s a good argument as well that we could see yields cool in the months ahead.

As things stand, economic data is paramount and is a key driver of market sentiment. We’ve already got a taste of how quickly things can change from the softer US data last week. And if that keeps up, especially with softer labour market conditions, it could compel traders to consider more rate cuts so long as inflation doesn’t run much hotter from here.

That said, the oversupply in Treasuries was already a key factor driving yields higher last year. And that might come into play again, should we see economic data take more of a backseat that is.

This article was written by Justin Low at www.forexlive.com.