The ‘Sell America’ trade is back with a vengeance this morning after Donald Trump threatened the Fed’s independence again. The ECB cuts rates, with further easing expected, and Australia’s jobs market stays strong ahead of expected RBA rate cuts.
In our bonus Deep Dive interview, ANZ Group Chief Economist Richard Yetsenga analyses the risks inherent in Donald Trump’s comments challenging the US Federal Reserve’s independence.
5 things to know in 5 minutes:
US stocks, the US dollar and US Treasury bond prices are all down sharply after Donald Trump again called into question the independence of the US Federal Reserve, saying Fed Chair Jerome Powell was a ‘major loser’ and ‘Mr Too Late’ because he has not cut US rates as much as the seven times the European Central Bank has cut over the last year. As of 4am Sydney/Melbourne time, the S&P 500 is down 3.3%, the Nasdaq is down 3.5% and the US 10 year Treasury yield is up six basis points at 4.39%. ANZ Economist Bansi Madhavani says she expects two more rate cuts from the ECB.
Australia’s unemployment rate rose to 4.1% in March from a revised 4% in February, as employment rose by just over 32,000. ANZ Economist Maddy Dunk says the labour market remains solid.
Maddy says the strength in the jobs market isn’t keeping the RBA from eyeing up global economic developments as reasons for potential rate cuts.
New Zealand’s inflation rose 0.9% in the first quarter and was up 2.5% from a year ago. ANZ Economist Miles Workman says the headline number was boosted by tradable inflation, which the RBNZ should look through.
The Bank of Korea held rates at 2.75% last week after it cut in February. ANZ Economist Krystal Tan says the BoK cited uncertainty on US tariff policy and domestic stimulus as well as exchange rate volatility.
Cheers,
Bernard
PS: Catch you tomorrow with a read on how US business conditions fared in April, following those tariff announcements.
