STIR: RBA Dated OIS Pricing Sharply Softer After Trump Tariff Details

RBA-dated OIS pricing is flat to 5bps softer across meetings today. 

• Nevertheless, pricing remains mixed compared to February’s pre-RBA Decision levels—meetings through July are 2-4bps firmer, while those beyond are 1-13bps softer.
• Last week, January headline CPI inflation printed slightly lower than expected at 2.5% y/y, in line with December. However, the underlying trimmed mean rose 0.1pp to 2.8%, but still below the top of the RBA’s 2-3% band. The first month of the quarter has limited updates on services inflation.
• A 25bp rate cut in April is given an 11% probability, with a cumulative 61 bps of easing priced by year-end (based on an effective cash rate of 4.09%). 

Figure 1: RBA-Dated OIS – Today Vs. Pre-RBA Levels

Source: MNI – Market News / Bloomberg

• RES 3: 97.190 - High May 5 2023
• RES 2: 96.730/932 - High Sep 17 / 76.4% of Mar-Nov ‘23 bear leg 
• RES 1: 96.310/360 High Feb 7 / High Dec 11  
• PRICE: 96.230 @ 16:20 GMT Mar 3
• SUP 1: 95.900 - Low Jan 14  
• SUP 2: 95.760 - Low 14 Nov ‘24
• SUP 3: 95.480 - Low Jan 11 2023 and a major support 

A medium-term bear cycle in Aussie 3-yr futures remains intact, with Wednesday weakness confirming short-term gains as corrective. On the upside, an extension higher would signal scope for 96.360, the Dec 11 high. Clearance of this level would open 96.730, the Sep 17 ‘24 high. On the downside, a reversal lower from current levels would signal a resumption of the downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low. 

• Following last week’s profit taking, gold’s rally resumed overnight as the threat of tariffs hung over markets.
• As President Trump’s deadline for tariffs draws near, markets sentiment was very weak with the S&P down heavily and bond yields rallying as much as 6bps.
• No surprise in that environment that gold rallied, with bullion up +1.2% on the day.
• Gold it rose steadily all day to finish the US trading session on its highs of $2,892.79.
• US data releases didn’t help to improve investor sentiment with ISM Prices Paid higher than expected whilst ISM Manufacturing softened.
• The weaker than expected data release adds to speculation of potential interest rate cuts by the Federal Reserve which is an additional boost to gold.