Markets Daily
The US Federal Reserve hiked by 25bp, as was widely expected, and hinted at a pause. Bond yields fell in response, extending later on fresh worries about US regional banks. This also hurt commodity prices and knocked AUD below 0.6650. Today’s calendar includes Australia March trade balance and the ECB policy decision.
Yesterday
Australia retail sales posted a 0.4% rise in March, up 5.4%yr. The flat Q1 result for nominal retail sales compares to a 0.9% gain in Q4. Allowing for inflation, it points to a sizeable decline in sales volumes of around -1%qtr (ABS estimates of real retail sales will be released on 9 May). After the sharp movements around the RBA decision Tuesday, AUD/USD traded a tight 0.6655 to 0.6676 range. Japan and China markets were closed, with the rest of the region’s equities mostly soft, including the ASX 200, -1%. AUD/NZD slipped 50 pips to 1.0685 in the wake of New Zealand’s strong Q1 jobs data.
Currencies/Macro
The US dollar fell against European FX and JPY but held its ground against commodity FX. EUR/USD rose throughout the day, overall up 0.6% at 1.1065. GBP/USD rallied 1 cent or 0.8% to 1.2565. USD/JPY followed the slide in US yields, slumping about 2 yen or -1.4% to 134.60. AUD/USD popped up to 0.6703 in the initial FOMC reaction, steadied around 0.6670 for a while but then fell below 0.6650 as risk aversion rose on a Bloomberg report that US regional bank PacWest was considering options including sale. NZD/USD touched 0.6261 but was back to 0.6210 by the Sydney morning. This left AUD/NZD around 1.0700, -0.3% on the day.
The FOMC increased the funds rate band by 25bp to 5.0%-5.25%, as was widely expected. The statement hinted at a pause: "The Committee will closely monitor incoming information and assess the implications for monetary policy", removing the March sentence: "The Committee anticipates that some additional policy firming may be appropriate…”. It reiterated that the banking system is "sound and resilient" but added that "tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain." Also included was: " The Committee remains highly attentive to inflation risks…the economy continued to expand at a moderate pace…while job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated." The vote was unanimous. During the press conference, Chair Powell ruled out near term rates cuts, but did again hint they may now be in pause mode, data dependent.
US services ISM in April was close to expectations at 51.9 (est. 51.8, prior 51.2), bolstered by a rise in new orders. ADP private sector payrolls in April jumped 296k (est. 148k, prior 142k).
Interest rates
The Fed delivered an expected 25bp hike at the FOMC meeting on Wednesday, but removed guidance that they anticipate further rate increases. The US regional banking sector concerns also renewed safe haven buying and US bonds rallied. 2yr government bond yields fell 16bps to 3.80%, and 10yr government bond yields fell 9bps to 3.34%.
Australian bonds took their lead from US price action, after the RBA delivered a surprise 25bp hike on Tuesday, but underperformed their US counterparts. 3yr government bond yields fell 9bps to 3.02%, and 10yr government bond yields fell 8bps to 3.33%. The AU-US 10yr bond spread widened on the back of AU underperformance, currently at -1bps.
Credit indices reflect the shift in sentiment pre and post the Fed with Main half a bp tighter at 86 and CDX now 2bp wider to 81.5 having been ~0.5bp wider before the Fed. Cash credit was softer again with banks remaining the weak point despite a more positive session for regional bank equity in early trade, but aftermarket pressure on PacWest will see pressure remain. Primary activity was light ahead of the Fed as expected, however we now move into a clearer calendar as corporates emerge from blackout.
Commodities
Commodities were pressured overnight, weighed by the broader setback in the global risk mood. Brent crude oil fell 4.5% to $72/b, copper fell 1.0%, spot iron ore fell 0.7% to $104/t. Oil prices extended losses in early Asia trade, WTI futures diving more than 6.5% to $63.68/bbl, a low since late 2021 after higher than expected US inventories were reported. Gold rose 0.5%.
Mainland China markets reopen today, absorbing mostly negative global news but also free of holidays until late June, so there will be a close eye on the tone of trade in iron ore and oil futures in particular.
Day ahead
At 11:30am Syd, we expect Australia to record another very large trade surplus in March. Westpac looks for a slight fall from $13.9bn to $13.6bn. We see a weaker A$ driving a 0.7%mth rise in import values, while exports are likely to be about flat, with commodity prices lower in the month but services exports continuing to grow post-lockdowns.
ANZ commodity prices should meanwhile rise in April given higher dairy and meat prices in the month.
China markets reopen today for the first time this week. External demand should provide some support to the Caixin manufacturing PMI in April, which is set to hold steady (market f/c: 50.0).
All economists in the Bloomberg survey expect the ECB to raise rates at today’s meeting. Consensus is for a 25bp rate hike to 3.25% deposit rate (which bottomed at -0.50% from 2019 to mid-2022) and 3.75% main refinancing rate. Markets price a modest risk of a 50bp, which has been the choice of the past 3 meetings. President Lagarde’s press conference will be closely watched as always.
With interest rate pressures elevated in the UK, net mortgage lending will likely remain subdued in March (market f/c: £1.6bn). The final estimate to April’s S&P Global services PMI is also due for both Europe and the UK.
US: A moderate narrowing in the trade deficit is anticipated in March given the underlying softening in consumer demand (market f/c: -$63.1bn). Initial jobless claims should meanwhile remain at a low level versus history (market f/c: 240k).
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Aussie bulls press the advantage
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.