Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Aussie boosted by budget, for once
The Australian dollar was higher overnight, boosted by the Australian government’s budget announcement, which looks likely to add demand to the Australian economy through household support and tax cuts.
The classic pre-election budget remained mostly restrained, with an eventual $10 per week tax cut from 2027 and a $150 energy subsidy for households in the second half of 2025. Existing university loans will be cut by 20% while $8.5 billion is directed to health care. Beer taxes will be frozen for two years.
The AUD – usually mostly unmoved by the annual budget – climbed about 40 pips after the announcement while the chances for a May rate cut from the RBA fell from 66% on Monday to 55% after the budget was released.
The tax cut announcement – held back from early release and essentially a surprise to markets – contributed to the rally.
In other markets, a mostly muted session in overseas markets were driven by another drop in US consumer confidence. The ongoing noise around tariffs and worries about a potential US recession appear to be hurting confidence. The US dollar mostly fell.
The NZD/USD was steady near two-week lows, the USD/SGD fell from three-week highs while the USD/CNH continues to trade near three-week highs.
Australia inflation data crucial for May cut prospects
At 11:30 AEDT today, the Australia monthly consumer price index (CPI) will be revealed. According to consensus, this indicator will essentially stay the same in February, at around 2.5% year over year.
For the RBA, next month’s December-quarter CPI number will be far more important. We presently forecast the Q1 trimmed mean CPI will likely soften to about 2.9% y-o-y and attribute an approximate 60% chance to a May rate cut, which depends on Q1 CPI data regarding the RBA’s capacity to execute a second 25bp rate cut in May.
Despite good gains in other cyclical markets, like the euro and GBP, the AUD/USD pair has so far been held back by major resistance near 0.6444 (200-day MA).
UK inflation stickiness drives BOE caution
At 18:00 AEDT today, the UK consumer price inflation for February will be revealed.
Higher alcohol taxes, the possibility of another significant increase in food costs, and a 2% monthly increase in gas prices should all work together to keep headline inflation high in February. In fact, we don’t think the headline will shift from January’s 3%.
GBP/USD is currently at five-month highs, while GBP/SGD at eight-month highs. AUD/GBP remains near five-year lows while NZD/GBP is plumbing ten-year lows.
In the short term, we anticipate consolidation and mean reversion to the downside for GBP/USD, with the 1.28 region serving as first support.
For GBP/SGD, the 50-day MA of 1.7061 will be the key major support.
Aussie up for second day
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 24 – 29 March
All times AEDT
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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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