Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie in focus ahead of RBA
The Australian dollar was higher overnight ahead of today’s key decision from the Reserve Bank of Australia.
Financial market pricing sees a 99% probability of a cut with a further 50bps worth of cuts priced in for the remainder of 2025 (source: Bloomberg).
However, the RBA is likely to provide a more cautious commentary, with inflation in Australia remaining persistently steady over the last 12 months and last week’s stronger than expected employment numbers also adding to the RBA’s concerns over price pressures. The RBA meets at 2.30pm AEST.
Otherwise, the overnight action was driven by the response to the weekend’s US credit downgrade from Moody’s.
The US dollar was mostly lower although US shares, which initially fell, recovered to end the day higher.
US confidence slump weighs on greenback
The University of Michigan 1Y inflation expectation increased from 6.5% to 7.3%, surpassing the consensus of 6.5% and reaching its highest level since 1981.
Consumer sentiment dropped from 52.2 to 50.8, below the consensus of 53.5.
US Federal Reserve members have continuously expressed concern about growing consumer inflation expectations, which will only make the Fed more hawkish.
Looking at APAC FX, any rebound in USD/SGD will be testing next key resistance levels of the 21-week EMA of 1.3240 and 50-week EMA of 1.3318 next.
Euro weaker in APAC with “rates near terminal”
The euro saw a small rebound in APAC yesterday but, more broadly, remains near recent lows.
Martins Kazaks, the governor of the central bank of Latvia, has shifted away from his dovish stance.
The trade situation appears to be de-escalating, despite the fact that there is still a lot of uncertainty, Kazaks stated. He stated on CNBC that there is still a chance of a brief and weak recession.
He stated that assuming the ECB’s baseline assumption continues, rates are likely near the terminal point and that there was no reason to hasten any rate cuts.
AUD/EUR is above the average of the 30-day trading range and EUR buyers may look to take advantage at current levels – with next target to the daily 200-day EMA 0.5917.
For EUR/SGD, it is at the low end of the 30-day trading range providing opportunity for EUR buyers at current levels.
Aussie higher as RBA looms
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 19 – 24 May
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*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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