Aussie starts recovering after RBA decision
The Australian dollar rose on Tuesday against a basket of major rivals, in an attempt to rebound from four-week lows against the dollar, and on track for the first profit in three days on short-covering after the RBA’s policy decision.
The Reserve Bank of Australia held interest rates unchanged as expected while warning from the impact of US tariffs on the global economy.
RBA Governor Michelle Bullock’s remarks were more bullish than expected, hurting the odds of an RBA rate cut in May.
The Price
The AUD/USD pair rose 0.35% today to $0.6268, with a session-low at $0.6232.
Aussie lost 0.7% on Monday against the US dollar, the second loss in a row, plumbing four-week lows at 62.19 cents due to global trade tensions.
RBA
The Reserve Bank of Australia voted to hold interest rates unchanged at 4.10%, the lowest since October 2023, as expected.
At the February policy meeting, the RBA cut rates by 25 basis points to 4.10%, the first such cut since March 2020.
The RBA believes that current monetary policies are prepared to respond to international developments in case they have a deep impact on Australia’s economic performance and inflation, with a particular eye on Trump’s global tariffs.
Bullock
RBA Governor Michelle Bullock said the central bank hasn’t yet achieved full confidence in inflation, but it’s holding hopes for gradual dips in consumer prices.
She said the RBA doesn’t support current market forecasts for future interest rate decisions.
She clearly hinted that a rate cut in May isn’t likely, dashing market hopes.
Australian Rates
The odds of an RBA 0.25% rate cut in May tumbled sharply from 80% to 50%, with traders now waiting for more inflation, unemployment, and wages data to gather more clues before the May meeting.
RBA holds interest rates at October 2023 lows
The Reserve Bank of Australia voted to hold interest rates unchanged at 4.10%, the lowest since October 2023, as expected.
At the February policy meeting, the RBA cut rates by 25 basis points to 4.10%, the first such cut since March 2020.
Wall Street declines as the week opens up
US stock indices fell on Monday amid concerns about trade war escalation as President Donald Trump prepares to impose new tariffs.
The Trump administration plans to impose reciprocal tariffs on all countries that target the US with trade barriers on Wednesday, which he called the “liberation day”.
Trump said these tariffs will cover all countries and not just a small number of economies that have a trade surplus with the US.
On trading, Dow Jones fell 0.2% as of 14:37 GMT, or 65 points to 41,518 points, while S&P 500 fell 0.9%, or 52 points to 5528 points, as NASDAQ gave up 3%, or 353 points to 16675 points.
Gold climbs above $3100 for first time in history
Gold prices rose in European trade on Monday and expanded the gains for the third straight session, trading above $3100 for the first time in history and on track for the biggest monthly profit since 2020.
The gains come amid increasing haven demand on the metal due to mounting global trade concerns before a new round of US reciprocal tariffs scheduled on Wednesday.
Prices
Gold prices rose 1.4% today to $3127 an ounce, a record high, with a session-low at $3076.
On Friday, gold rose 0.9%, the third profit in a row, as both the dollar and US treasury yields fell.
Gold rose 2% last week, the fourth weekly profit in a row amid mounting tensions due to US auto tariffs.
Monthly Trades
Gold prices are up 9.5% so far this month on track for the third monthly profit in a row, and the largest since July 2020.
Trump’s Tariffs
Markets are on edge before US President Donald Trump’s new reciprocal tariffs. Details are limited, but Trump said almost all countries will face tariffs.
Trump said he’s open to negotiate deals with countries that seek to avoid tariffs, but the Washington Post reported in the weekend that he’s aiming for a stricter approach.
US Yields
US 10-year treasury yields fell 1.4% on Monday on track for the second loss in a row, plumbing a two-week trough at 4.192%.
US Rates
According to the Fedwatch tool, the odds of a 0.25% Fed interest rate cut in May stood at 18%.
The odds of such a cut in June stood at a much stronger 18%, with investors now waiting for important US data and speeches by Fed officials this week to gather more clues.
SPDR
Gold holdings at the SPDR Gold Trust rose by 2.29 tons on Friday to a total of 931.93 tons, the highest since June 2023.