Articles

• I don’t think nuclear talks with the US will be successful.

This headline gave crude oil prices a boost as the markets continue to bounce around amid the US-Iran nuclear deal. A positive resolution is seen as bearish (at least in the near term) due to higher supply expectations. Conversely, negative outcomes are seen as bullish.

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

There was so much noise over the weekend and yesterday about the Moody’s downgrade with even some doomsday scenarios. I’ve argued (here) that it was no big deal and just a symbolic thing.

If you look at the US30Y chart now, the market erased the entire rise and we are basically back to where we were before the downgrade. We can now go back to focus on what really matters, which is future Fed policy and inflation expectations.

As I mentioned here,
there’s limited downside at the moment for yields and the path of least
resistance remains to the upside as inflation risk increases. In fact,
as we now price in better and better conditions for growth, the economic
activity will
likely start to accelerate and that could lead to inflationary
pressures.

The Fed is also in a difficult position because rate cuts now
could exacerbate inflation fears and drive long term yields even
higher. That’s what will drive the bond market in the next months.

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

• Eurostoxx +0.2%
• Germany DAX +0.2%
• France CAC 40 +0.2%
• UK FTSE +0.2%
• Spain IBEX +0.4%

In the end, the Moody’s downgrade was indeed a nothingburger as expected. As the US session began yesterday, we saw markets reversing across the board and climbing to new highs. We can now go back to focusing on what really matters.

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

• Some members said JGB market functionality improving as a trend due to BoJ’s taper.
• Other participants said there is distortion between super-long yields and yields for other maturities due to dwindling liquidity in super-long JGB market.
• Some market participants called for faster pace of BoJ taper from fiscal 2026 though others called for maintaining or slowing pace.
• Opinions from market players included those wanting new taper plan to cover about two years, and others saying BoJ should lay out a 1-year plan then maintain that taper level thereafter.
• Opinions by market players on monthly BoJ bond buying amount at the end of new taper period ranged from zero, 1-2 trillion yen, and about 3 trillion yen.
• Opinions by market players included one calling for nimble response to sharp decline in liquidity for super-long JGBs such as termination of taper or increase in BoJ’s purchase amount.
• Others said worsening supply-demand for super-long JGBs is due to structural factor such as lack of investor demand, and not something BoJ can fix.

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

• Disinflation is on track, but new shocks are posing new challenges.
• Tariffs may be disinflationary in the short run but pose upside risks over the medium term.
• Appreciation of the Euro is historical opportunity to foster the international role of the Euro.

There’s nothing new here but I agree that tariffs are disinflationary in the short term given the negative demand shock but it could indeed pose upside risk on inflation going forward especially if you get the reversal in policies like we’ve seen with Trump and therefore potential pick up in economic activity as uncertainty eases.

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

IC Markets Europe Fundamental Forecast | 20 May 2025

What happened in the Asia session?

As widely anticipated, the Reserve Bank of Australia (RBA) reduced its cash rate by 25 basis points (bps) to 3.85% this morning, marking the first rate cut since January and aligning with market expectations. This move lowered borrowing costs to their lowest level in two years, as both headline and core inflation returned to the RBA’s 2 to 3% target range. The board noted that inflation risks have become more balanced, but the outlook remains uncertain, particularly due to ongoing volatility in global trade policy. The international economic environment has worsened, partly because of increased U.S. tariffs, leading the RBA to consider the possibility of a more severe downturn. The Aussie fell sharply following the release of the monetary policy statement, tumbling toward 0.6400.

What does it mean for the Europe & US sessions?

After accelerating from December 2024 till February of this year, inflationary pressures in Canada moderated in March. However, the forecasts for April point to several inflation metrics such as median-/trimmed-/common-CPI all showing persistent price pressures. Should we see a ‘hot’ print later today, the Loonie could see a renewed resurgence and cause USD/CAD to fall. 

Crude oil prices edged slightly higher on Monday as signs of a breakdown in U.S. talks with Iran over its nuclear program offset the outlook for weaker demand growth. In addition, mixed macroeconomic data from China also weighed on this commodity. WTI oil fluctuated approximately between $61 and $63 before settling around $62 per barrel. Moving over to U.S. inventories, the change in API stockpiles has trended higher since February, typically a sign of weaker domestic consumption. Should these stockpiles continue to build higher than market forecasts, oil prices will likely be subjected to strong headwinds later today.

The Dollar Index (DXY)

Key news events today

FOMC Member Musalem’s Speech (5:00 pm GMT)

FOMC Member Daly’s Speech (11:00 pm GMT)

FOMC Member Hammack’s Speech (5:00 pm GMT)

What can we expect from DXY today?

There is a trio of Federal Reserve Presidents speaking at their respective events, with   Federal Reserve Bank of St. Louis President Alberto Musalem kicking things off at the Economic Club of Minnesota, while Federal Reserve Bank of San Francisco President Mary Daly and Federal Reserve Bank of Cleveland President Beth Hammack take part in a moderated discussion at the Financial Markets Conference hosted by the Federal Reserve Bank of Atlanta. Demand for the dollar tanked following a downgrade of the United States’ credit rating by credit agency Moody’s late on Friday. The dollar index (DXY) was edging lower toward the threshold of 100 in early trading on Tuesday.

Central Bank Notes:

• The Board of Governors of the Federal Reserve System voted unanimously to maintain the Federal Funds Rate in a target range of 4.25 to 4.50% on 7 May 2025.
• The Committee seeks to achieve maximum employment and inflation at the rate of 2% over the longer run, but uncertainty around the economic outlook has increased further.
• The Committee is attentive to the risks to both sides of its dual mandate and judges that the risks of higher unemployment and higher inflation have risen.
• Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace while the unemployment rate has stabilised at a low level in recent months, and labour market conditions remain solid. However, inflation remains somewhat elevated.
• GDP growth forecasts were revised downward for 2025 (1.7% vs. 2.1% in the December projection) while PCE inflation projections have been adjusted slightly higher for 2025, with core inflation expected to reach 2.5%, partly due to tariff-related pressures.
• In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook and would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of its goals.
• Beginning in April, the Committee will slow the pace of decline of its securities holdings by reducing the monthly redemption cap on Treasury securities from $25B to $5B while maintaining the monthly redemption cap on agency debt and agency mortgage-backed securities at $35B.
• The next meeting is scheduled for 17 to 18 June 2025.

Next 24 Hours Bias

Weak Bullish

Gold (XAU)

Key news events today

FOMC Member Musalem’s Speech (5:00 pm GMT)

FOMC Member Daly’s Speech (11:00 pm GMT)

FOMC Member Hammack’s Speech (5:00 pm GMT)

What can we expect from Gold today?

There is a trio of Federal Reserve Presidents speaking at their respective events, with   Federal Reserve Bank of St. Louis President Alberto Musalem kicking things off at the Economic Club of Minnesota, while Federal Reserve Bank of San Francisco President Mary Daly and Federal Reserve Bank of Cleveland President Beth Hammack take part in a moderated discussion at the Financial Markets Conference hosted by the Federal Reserve Bank of Atlanta. This downgrade provided lift for gold as demand for safe-haven assets resumed following a downgrade of the United States’ credit rating by credit agency Moody’s late on Friday. Spot prices stabilised around $3,200/oz on Monday with a likelihood that this precious metal remains supported in the near term.

Next 24 Hours Bias

Weak Bearish

The Australian Dollar (AUD)

Key news events today

RBA Interest Rate Decision (4:30 am GMT)

RBA Press Conference (5:30 am GMT)

What can we expect from AUD today?

As widely anticipated, the Reserve Bank of Australia (RBA) reduced its cash rate by 25 basis points (bps) to 3.85% this morning, marking the first rate cut since January and aligning with market expectations. This move lowered borrowing costs to their lowest level in two years, as both headline and core inflation returned to the RBA’s 2 to 3% target range. The board noted that inflation risks have become more balanced, but the outlook remains uncertain, particularly due to ongoing volatility in global trade policy. The international economic environment has worsened, partly because of increased U.S. tariffs, leading the RBA to consider the possibility of a more severe downturn. The Aussie fell sharply following the release of the monetary policy statement, tumbling toward 0.6400.

Central Bank Notes:

• The RBA reduced its cash rate by 25 basis points (bps), bringing it down to 3.85% on 20 May, following a pause on 1 April.
• Inflation has fallen substantially since the peak in 2022, as higher interest rates have been working to bring aggregate demand and supply closer towards balance.
• Data on inflation for the March quarter provided further evidence that inflation continues to ease. At 2.9%, annual trimmed mean inflation was below 3% for the first time since 2021 and headline inflation, at 2.4%, remained within the target band of 2 to 3%.
• While recent tariff announcements have resulted in a rebound in financial market prices, there is still considerable uncertainty about the final scope of the tariffs and policy responses in other countries, contributing to a weaker outlook for growth, employment and inflation in Australia.
• Private domestic demand appears to have been recovering, real household incomes have picked up and there has been an easing in some measures of financial stress. However, businesses in some sectors continue to report that weakness in demand makes it difficult to pass on cost increases to final prices.
• At the same time, a range of indicators suggests that labour market conditions remain tight. Employment is continuing to grow, measures of labour underutilisation are at relatively low rates and business surveys and liaison suggest that availability of labour is still a constraint for a range of employers.
• Looking through quarterly volatility, wage growth has softened over the past year or so but productivity growth has not picked up and growth in unit labour costs remains high.
• There are uncertainties about the outlook for domestic economic activity and inflation stemming from both domestic and international developments. While the central projection is for growth in household consumption to continue to increase as real incomes rise, recent data suggest that the pick-up will be a little slower than was expected three months ago.
• There is a risk that any pick-up in consumption is even slower than this, resulting in continued subdued growth in aggregate demand and a sharper deterioration in the labour market than currently expected.
• With inflation expected to remain around target, the Board therefore judged that an easing in monetary policy at this meeting was appropriate, assessing that this move would make monetary policy somewhat less restrictive.
• The Board will be attentive to the data and the evolving assessment of risks to guide its decisions. In doing so, it will pay close attention to developments in the global economy and financial markets, trends in domestic demand, and the outlook for inflation and the labour market.
• The Board is focused on its mandate to deliver price stability and full employment and will do what it considers necessary to achieve that outcome.
• The next meeting is on 8 July 2025.

Next 24 Hours Bias

Weak Bearish

The Kiwi Dollar (NZD)

Key news events today

No major news events.

What can we expect from NZD today?

With no major domestic catalyst, the Kiwi will likely take its cue from its Pacific neighbour, especially with anticipation of a potential rate cut by the Reserve Bank of Australia (RBA). The Kiwi rallied over 1% on Monday to rise above 0.5900 – this currency pair was hovering around 0.5930 at the beginning of the Asia session.

Central Bank Notes:

• The Monetary Policy Committee (MPC) agreed to reduce the Official Cash Rate (OCR) by 25 basis points bringing it down to 3.50% on 9 April, marking the fifth consecutive rate cut.
• The Committee assessed that annual consumer price inflation remains near the midpoint of the MPC’s 1 to 3% target band while firms’ inflation expectations and core inflation are consistent with inflation remaining at target over the medium term.
• Economic activity has evolved largely as expected since the February Monetary Policy Statement; higher-than-expected export prices and a lower exchange rate have supported primary sector incomes and overall economic growth.
• Although monetary restraint had been removed at pace, household spending and residential investment have remained weak.
• The recently announced increases in global trade barriers weaken the outlook for global economic activity. On balance, these developments create downside risks to the outlook for economic activity and inflation.
• The Committee noted that the increase in tariffs will take time to work through the global economy, but the direct price increases for economies imposing tariffs and the dampening impact of increased economic uncertainty on global demand will occur relatively quickly.
• With CPI inflation close to the mid-point of the target range, significant spare capacity in the economy, and a weaker activity outlook stemming from global trade policy, the Committee agreed that a further reduction in the OCR was appropriate.
• Meanwhile, future policy decisions will be determined by the outlook for inflationary pressure over the medium term.
• The next meeting is on 28 May 2025.

Next 24 Hours Bias

Weak Bearish

The Japanese Yen (JPY)

Key news events today

No major news events.

What can we expect from JPY today?

Following a downgrade of the United States’ credit rating by credit agency Moody’s late on Friday, demand for safe-haven assets such as the yen increased sharply, causing USD/JPY to decline over 0.7% on Monday. This currency pair fell under 145 overnight and it continued to slide lower as Asian markets came online on Tuesday.

Central Bank Notes:

• The Policy Board of the Bank of Japan decided on 1 May, by a unanimous vote, to set the following guidelines for money market operations for the inter-meeting period:
  1. The Bank will encourage the uncollateralized overnight call rate to remain at around 0.5%.
  2. The Bank will continue its plan to reduce the amount of its monthly outright purchases of JGBs, aiming to reach about 3 trillion yen by January-March 2026.
• Japan’s economic growth is likely to moderate, as trade and other policies in each jurisdiction lead to a slowdown in overseas economies and to a decline in domestic corporate profits and other factors, although factors such as accommodative financial conditions are expected to provide support. Thereafter, Japan’s economic growth rate is likely to rise, with overseas economies returning to a moderate growth path.
• The year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) is likely to be in the range of 2.0-2.5% for fiscal 2025, in the range of 1.5-2.0% for fiscal 2026, and at around 2% for fiscal 2027. The effects of the past rise in import prices and of the recent rise in food prices such as rice prices – these factors have pushed up the inflation rate so far – are expected to wane.
• Meanwhile, underlying CPI inflation is likely to be sluggish, mainly due to the deceleration in the economy. Thereafter, however, underlying CPI inflation is expected to increase gradually.
• Regarding the employment and income situation, despite the deceleration in the economy, labour market conditions are likely to remain tight, as it will become more difficult for labour supply of women and seniors to increase.
• Comparing the projections through fiscal 2026 with those presented in the previous Outlook for Economic Activity and Prices (Outlook Report), the projected real GDP growth rate for fiscal 2024 is somewhat higher, but the projected growth rates for fiscal 2025 and 2026 are lower due to the effects of trade and other policies in each jurisdiction.
• There are various risks to the outlook. In particular, it is extremely uncertain how trade and other policies in each jurisdiction will evolve and how overseas economic activity and prices will react to them. It is therefore necessary to pay due attention to the impact of these developments on financial and foreign exchange markets and on Japan’s economic activity and prices.
• With regard to the risk balance, risks to economic activity are skewed to the downside for fiscal 2025 and 2026. Risks to prices are also skewed to the downside for fiscal 2025 and 2026.
• The next meeting is scheduled for 17 June 2025.

Next 24 Hours Bias

Weak Bullish

The Euro (EUR)

Key news events today

No major news events.

What can we expect from EUR today?

Monday’s final consumer inflation readings for the Euro Area showed headline CPI remaining unchanged at an annual rate of 2.2% while the core jumped from 2.4% in the prior month to 2.7% in April. Coupled with significant dollar weakness, the Euro rallied over 1% as it rose strongly toward 1.1300 during Monday’s European trading hours before pulling back overnight. This currency pair dipped under 1.1250 by the end of the U.S. session but strong tailwinds remained in place as it climbed higher at the beginning of Tuesday’s Asia session.

Central Bank Notes:

• The Governing Council reduced the three key ECB interest rates by 25 basis points on 17 April to mark the sixth successive rate cut.
• Accordingly, the interest rate on the main refinancing operations and the interest rates on the marginal lending facility and the deposit facility will be decreased to 2.40%, 2.65% and 2.25% respectively.
• The disinflation process is well on track with both headline and core inflation declining in March while services inflation has also eased markedly over recent months. Most measures of underlying inflation suggest that inflation will settle at around the Governing Council’s 2% medium-term target on a sustained basis.
• Wage growth is moderating, and profits are partially buffering the impact of still elevated wage growth on inflation. The euro area economy has been building up some resilience against global shocks, but the outlook for growth has deteriorated owing to rising trade tensions.
• Increased uncertainty is likely to reduce confidence among households and firms, and the adverse and volatile market response to the trade tensions is likely to have a tightening impact on financing conditions. These factors may further weigh on the economic outlook for the euro area.
• The asset purchase programme (APP) and pandemic emergency purchase programme (PEPP) portfolios are declining at a measured and predictable pace, as the Eurosystem no longer reinvests the principal payments from maturing securities.
• The Governing Council is determined to ensure that inflation stabilises sustainably at its 2% medium-term target. Especially in current conditions of exceptional uncertainty, it will follow a data-dependent and meeting-by-meeting approach to determining the appropriate monetary policy stance.
• In particular, the Council’s interest rate decisions will be based on its assessment of the inflation outlook in light of the incoming economic and financial data, the dynamics of underlying inflation and the strength of monetary policy transmission.
• The next meeting is on 5 June 2025.

Next 24 Hours Bias

Weak Bearish

The Swiss Franc (CHF)

Key news events today

No major news events.

What can we expect from CHF today?

Swiss National Bank (SNB) Chairman Martin Schlegel stated that the level of uncertainty in financial markets is currently very high, noting that the appetite for the Swiss franc increases significantly during such times. He also added that the outlook for inflation in Switzerland remains unclear during his speech on Monday. The franc had appreciated over 1.5% since last week, causing USD/CHF to slide toward 0.8300.

Central Bank Notes:

• The SNB eased monetary policy by lowering its key policy rate by 25 basis points, from 0.50% to 0.25% on 20 March 2025, marking the fifth consecutive reduction.
• Underlying inflationary pressure has decreased further this quarter.
• Inflation in the period since the last monetary policy assessment has again been lower than expected, decreasing from 0.7% in November to 0.3% in February, primarily due to lower electricity prices.
• In the shorter term, the new conditional inflation forecast is slightly higher than December: 0.3% for Q2 2025, 0.4% for 2025 overall, and 0.8% for 2026 and 2027, based on the assumption that the SNB policy rate remains at 0.25% over the entire forecast horizon.
• GDP growth in Switzerland remains moderate, with the services sector continuing to show slightly stronger growth, while manufacturing faces challenges.
• The SNB anticipates GDP growth of around 1.0% to 1.5% for 2025.
• The SNB will continue to monitor the situation closely and will adjust its monetary policy if necessary to ensure inflation remains within the range consistent with price stability over the medium term.
• The next meeting is on 19 June 2025.

Next 24 Hours Bias

Weak Bullish

The Pound (GBP)

Key news events today

No major news events.

What can we expect from GBP today?

Cable remains buoyed by broad weakness in the U.S. dollar, with the latest catalyst being the downgrade of U.S. credit by the ratings agency Moody’s last week. Overall dollar frailty continues to support this currency pair’s upward momentum.

Central Bank Notes:

• The Bank of England’s Monetary Policy Committee (MPC) voted by a majority of 5 to 4 to reduce the Bank Rate by 25 basis points (bps), bringing it down to 4.25% on 8 May 2025.
• Two members preferred a larger cut of 50 bps, while two opted to hold rates steady at 4.5%.
• The MPC also voted unanimously to reduce the stock of UK government bond purchases held for monetary policy purposes and financed by the issuance of central bank reserves, by £100B over the next 12 months to a total of £558B, starting in October 2024. On 18 December 2024, the stock of UK government bonds held for monetary policy purposes was £655B.
• Progress on disinflation in domestic price and wage pressures is generally continuing. Twelve-month CPI inflation fell to 2.6% in March from 2.8% in February, close to expectations in the February Report.
• Although indicators of pay growth remain elevated, a significant slowing is still expected over the rest of the year.
• Wholesale energy prices have fallen back since the February Report. Previous increases in energy prices are still likely to drive up CPI inflation from April onwards, to 3.5% for 2025 Q3, but is expected to fall back thereafter.
• Underlying UK GDP growth is judged to have slowed since the middle of 2024 and has been much less volatile than growth in headline GDP – growth was expected to have been around zero in 2025 Q1, well below Bank staff’s projection for headline growth of 0.6%.
• Underlying employment growth has also softened recently and the labour market has continued to loosen. The ratio of vacancies to unemployment has fallen further and is now judged to be below its equilibrium level – the impact of higher Employers’ National Insurance Contributions (NICs) on employment appears to have been fairly small to date.
• Based on the Committee’s evolving view of the medium-term outlook for inflation, a gradual and careful approach to the further withdrawal of monetary policy restraint is appropriate and it will continue to monitor closely the risks of inflation persistence and what the evolving evidence may reveal about the balance between aggregate supply and demand in the economy.
• Monetary policy will need to continue to remain restrictive for sufficiently long until the risks to inflation returning sustainably to the 2% target in the medium term have dissipated further and the Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.
• The next meeting is on 19 June 2025.

Next 24 Hours Bias

Weak Bearish

The Canadian Dollar (CAD)

Key news events today

CPI (12:30 pm GMT)

What can we expect from CAD today?

After accelerating from December 2024 till February of this year, inflationary pressures in Canada moderated in March. However, the forecasts for April point to several inflation metrics such as median-/trimmed-/common-CPI all showing persistent price pressures. Should we see a ‘hot’ print later today, the Loonie could see a renewed resurgence and cause USD/CAD to fall.

Central Bank Notes:

• The Bank of Canada today maintained its target for the overnight rate at 2.75%, with the Bank Rate at 3% and the deposit rate at 2.70% – marking the first pause after seven consecutive meetings where rates were reduced.
• The major shift in direction of U.S. trade policy and the unpredictability of tariffs have increased uncertainty, diminished prospects for economic growth, and raised inflation expectations.
• Pervasive uncertainty makes it unusually challenging to project GDP growth and inflation in Canada and globally – the April Monetary Policy Report (MPR) presents two scenarios that explore different paths for US trade policy.
• In the first scenario, uncertainty is high but tariffs are limited in scope – Canadian growth weakens temporarily and inflation remains around the 2% target. In the second scenario, a protracted trade war causes Canada’s economy to fall into recession this year and inflation rises temporarily above 3% next year.
• Global economic growth was solid in late 2024 and inflation has been easing towards central bank targets. However, tariffs and uncertainty have weakened the outlook. In the U.S., the economy is showing signs of slowing amid rising policy uncertainty and rapidly deteriorating sentiment, while inflation expectations have risen. In the Euro Area, growth has been modest in early 2025, with continued weakness in the manufacturing sector. China’s economy was strong at the end of 2024 but more recent data shows it slowing modestly.
• In Canada, the economy is slowing as tariff announcements and uncertainty pull down consumer and business confidence. Consumption, residential investment and business spending all look to have weakened in the first quarter. Trade tensions are also disrupting recovery in the labour market. Employment declined in March and businesses are reporting plans to slow their hiring. Wage growth continues to show signs of moderation.
• The Governing Council will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs while proceeding carefully, with particular attention to the risks and uncertainties facing the Canadian economy.
• Monetary policy cannot resolve trade uncertainty or offset the impacts of a trade war and the Governing Council will focus on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval by supporting economic growth while ensuring that inflation remains well-controlled.
• The next meeting is on 4 June 2025.

Next 24 Hours Bias

Weak Bullish

Oil

Key news events today

API Crude Oil Stock (8:30 pm GMT)

What can we expect from Oil today?

Crude oil prices edged slightly higher on Monday as signs of a breakdown in U.S. talks with Iran over its nuclear program offset the outlook for weaker demand growth. In addition, mixed macroeconomic data from China also weighed on this commodity. WTI oil fluctuated approximately between $61 and $63 before settling around $62 per barrel. Moving over to U.S. inventories, the change in API stockpiles has trended higher since February, typically a sign of weaker domestic consumption. Should these stockpiles continue to build higher than market forecasts, oil prices will likely be subjected to strong headwinds later today.

Next 24 Hours Bias

Weak Bullish

The post IC Markets Europe Fundamental Forecast | 20 May 2025 first appeared on IC Markets | Official Blog.

• Prior was -0.7%
• PPI y/y -0.9% vs -0.6% expected
• Prior was -0.2%

Lower energy prices were the main reason for the year-on-year decline in
producer prices in April 2025. By contrast, non-durable and durable
consumer goods, capital goods and intermediate goods were more expensive
than in the same month of the previous year. When energy prices are
excluded, producer prices in April 2025 were up 1.5% on April 2024 and
increased by 0.4% compared with March 2025.

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

• Did discuss 25 bps or 50 bps cut.

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

• Must now keep inflation down, well placed to do so.
• Board ready to take further action if required.
• This is a confidence cut in rates.
• This is the right cut for now, more adjustments are possible.
• Hearing from businesses that margins are being impacted.

more to come…

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

The AUD is lower across the board following the RBA decision. The statement was basically the same of what we’ve got in April although there’s more emphasis on trade policies risk. What weighed on the Aussie dollar was the negative revision in growth and inflation forecasts.

The forecasts:

• GDP growth seen at 1.8% in June 2025, 2.2% in June 2026 and 2.2% in June 2027 (May forecasts)
• GDP growth seen at 2.0% in June 2025, 2.3% in June 2026 and 2.2% in June 2027 (February forecasts)

• Trimmed Mean Inflation seen at 2.6% in June 2025, 2.6% in June 2026 and 2.6% in June 2027 (May forecasts)
• Trimmed Mean Inflation seen at 2.7% in June 2025, 2.7% in June 2026 and 2.7% in June 2027 (February forecasts)

In my opinion, this is no big deal because forecasts can change and the central banks have no conviction on what’s next for policy and so on. My expectation is that we will have a rebound in growth and that would place upward pressure on inflation considering the recent rate cuts and fiscal boosts.

Therefore, I would expect the central banks, including the RBA to deliver less rate cuts than currently priced in. So I would fade this reaction in the AUD, especially versus other currencies because I’m still a bit bullish on the USD until further notice.

On the 1 hour chart, we can see that we have a nice support zone around the 0.6350 level on AUDUSD. Of course the pair is 80% driven by the USD, so the US macro factors are more influential, but if the sellers manage to extend the pullback, the support zone could be a nice spot where the buyers can look for dip buying opportunities. A break lower though, should open the door for the 0.60 handle next.

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

• Data on inflation for the March quarter
  provided further evidence that inflation continues to ease.
• Staff forecasts released today project that
  while headline inflation is likely to rise over the coming year to around the top of the band as
  temporary factors unwind, underlying inflation is now expected to be around the midpoint of the 2–3 per cent range throughout much of the forecast period.
• While recent announcements on tariffs have resulted in a rebound in
  financial market prices, there is still considerable uncertainty about the final scope of the tariffs and
  policy responses in other countries
• These
  developments are expected to have an adverse effect on global economic activity
• World trade policy is
  changing rapidly, thereby making the central forecasts subject to considerable uncertainty.
• Private domestic demand appears to have been recovering, real
  household incomes have picked up and there has been an easing in some measures of financial stress
• A range of indicators suggest that labour market conditions remain tight
• There are uncertainties about the outlook for domestic economic activity and inflation stemming from both
  domestic and international developments
• The Board judged that the risks to inflation have become more balanced
• Inflation is in the target band
  and upside risks appear to have diminished as international developments are expected to weigh on the
  economy
• With inflation expected to remain around target, the Board therefore judged that an easing in
  monetary policy at this meeting was appropriate.
• The Board assesses that this move will make monetary
  policy somewhat less restrictive
• It nevertheless remains cautious about the outlook
• The Board considered a severe
  downside scenario and noted that monetary policy is well placed to respond decisively to international
  developments
• The Board will be attentive to the data and the evolving assessment of risks to guide its decisions
• In
  doing so, it will pay close attention to developments in the global economy and financial markets, trends
  in domestic demand, and the outlook for inflation and the labour market.

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

The Reserve Bank of Australia is expected to cut its cash rate target by 25 bps bringing it to 3.85% vs 4.10% prior. Focus will be on macro forecasts and forward guidance.

I think the RBA will keep its neutral stance as it lowers the cash rate just as acknowledgement of inflation progress and as an “insurance” for some potential slowdown given the recent economic uncertainty.

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