Asia AM Digest: AUD Faces RBA, US Tariff Exemptions Deadline Due

A LOOK AHEAD – RBA, US METAL TARIFF EXEMPTIONS DEADLINE

As we begin May, the Reserve Bank of Australia’s monetary policy announcement is due later on during Tuesday’s Asian session. The markets are widely anticipating for rates to remain unchanged at 1.50%. In fact, overnight index swaps don’t price in a better-than-even chance that they may raise rates until February 2019. Another status quo announcement may allow the Australian Dollar to focus more on risk trends.

Meanwhile, the deadline for US metal tariff exemptions is midnight local time (4:00 GMT Tuesday). US Treasury Secretary Steven Mnuchin confirmed earlier that Donald Trump had still not made a final decision.

CURRENT MARKET DEVELOPMENTS – CRUDE OIL PRICES RISE

Crude oil prices rallied as Israel’s Prime Minister Benjamin Netanyahu revealed that Iran had a secret plan to build nuclear weapons. He said that the US has verified the authenticity of the files that exposed this. The markets may have interpreted this as raising the chances that the US may not extend sanction waivers on Iran. The deadline for this is May 12. This could consequentially disrupt the supply of oil.

PRIOR SESSION RECAP – US DOLLAR STILL STRONG

While the US Dollar outperformed on Monday, most of its gains were derived from the first half of the day. The relatively high-yielding greenback rose alongside stocks during the Asian and European session. However, sentiment reversed course during the second half as Wall Street closed in the red, leveling off US Dollar’s advance.

Interestingly, other sentiment-linked currencies like the Australian and New Zealand Dollarsunderperformed, perhaps at the expense of the greenback. US stock benchmark’s were weighed down by technology and industrial shares, further denting high-yielding currencies. The anti-risk Japanese Yenmanaged to put in a last minute advance towards the end of the day, but it was not enough to put it in the green.

The decline in sentiment towards the end of the day also hurt some ASEAN bloc currencies like the Indonesian Rupiah and Malaysian Ringgit. News that China will refuse to discuss the two toughest trade demands from the US also probably didn’t help here either. Since China is a major trading partner for some of the ASEAN countries, progress that goes in the opposite direction of settling trade disputes may bode ill.

Economic Calendar: Asia Pacific (all times in GMT)

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