GOLD: Steady Ahead Of US CPI & FOMC Decision
Gold is little changed in the Asia-Pac session, after closing 0.3% higher at $2317.01 on Tuesday.
- Bullion was supported by lower US Treasury yields, which in turn were buoyed by haven demand associated with European Parliament elections and the surprise snap election called in France. Solid demand metrics at a 10Y auction added to US Treasuries’ strength.
- The 10-year yield finished 7bps lower at 4.40%, with 2-year was down 5bps to 4.83%.
- Later today, the US calendar delivers US CPI at 0830ET today, with the FOMC policy announcement at 1400ET and Fed Chairman Powell’s presser at 1430ET.
- The market ascribes no chance for a rate cut at this meeting but will be seeking guidance on the timing of the first rate cut. The dot plot projections are likely to show the median FOMC member expecting just one or two rate cuts this year (down from three previously projected).
- According to MNI’s technicals team, the yellow metal cleared support around the 50-day EMA, at $2,315.2, in last week’s sharp sell-off, opening $2,277.4, the May 3 low. Initial resistance to watch is $2,387.8, Friday’s high.
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NEW ZEALAND: Inflation Expectations Moderate Further In Q2
Inflation continued to trend in the right direction with RBNZ 2-year business inflation expectations moderating to 2.3% in Q2 from 2.5%, the lowest since Q3 2021. 1-year out declined by more falling to 2.7% from 3.2%, the lowest in three years. Household inflation expectations have been running higher than business ones and Q2 for this survey will be published on May 20. Research by RBNZ has shown that mean 1-year ahead inflation expectations have had the best relationship with inflation. Both businesses and households are signalling that the CPI is heading to the target band.
New Zealand RBNZ core CPI y/y% vs inflation expectations %
Source: MNI - Market News/Refinitiv
NEW ZEALAND: NZD Down On Easing Inflation Expectations
NZD/USD has faltered post the release of the RBNZ inflation expectations data. The pair is back to around 0.6000, off 0.30% and the weakest performer in the G10 space. This puts us back sub the 50-day EMA (0.6007). Note the 20-day sits further south near 0.5980.
- AUD/NZD has recovered some ground from the 1.0960 region, we last tracked near 1.0990.
- 2yr ahead inflation expectations eased to 2.33% from 2.50% in Q1. This is the softest print for inflation expectations since 2021. It also comes ahead of next week's RBNZ meeting. 1yr ahead inflation expectations eased to 2.73% from 3.22% in Q1.
- In the rate/bond space yields are 1bp richer post the data and now trade about 0.5bps higher on the day, curve is little changed.
ASIA STOCKS: Asian Equities Mixed, NZ Inflation Expectations Fall
Asian equity markets are mixed today, Taiwan equities are the top performing market led by the semiconductor sector. There isn't much on the data calendar today, earlier we have NZ Food prices which increased from the month prior and Australia's NAB business survey's which show business conditions had fallen from the month prior.
- Japanese equities are little changed today, the real estate sector is the worst performing. There has been little in the way of headlines out of the region, with government officials staying surprising quiet on the currency so far today, the yen continued to slip on Friday and we currently trade little changed on the day at 155.75. The Nikkei 225 is up 4.10% from the lows on Apr 19th but has failed to break back above the 20 & 50-day EMAs and trade unchanged today, the Topix has performed slightly better over the same period up 5% and holds above all moving averages, however trades unchanged today.
- South Korean equities are lower today, earlier April household spending rose to KRW1,103.6T from KR1098.5t in March. The Kospi continues to comfortably hold above all major moving averages, while the RSI is holding above 50 and MACD indicator is holding steady, signaling buyers still remain in control, the index is down 0.32% today.
- Taiwan equities are the top performers today, flows turned positive again on Friday as investors continue buying up semiconductor stocks. It's a very quiet week on the data front for Taiwan with nothing scheduled. The Taiex opened at new all-time highs this morning, however we trade just off those levels now, up 0.83%.
- Australian equities are lower today, as investors await the federal budget that will be released on Tuesday, while earlier NAB's monthly business survey's showed that conditions eased in April, with trading, profitability and employment all back around their long-term averages. The ASX200 is down 0.25%.
- Elsewhere in SEA, New Zealand equities are down 1% with the 1yr inflation expectation falling to 2.73% from 3.22% and the 2yr falling to 2.33% from 2.50%, Indonesian equities have returned from their break and are trading up 0.10%, Philippines equities are up 1%, Malaysian equities up 0.15% and Indian equities up 0.45%
