Despite a busy day for corporate earnings and big-ticket M&A announcements yesterday, US stock markets closed slightly lower and the 10y Treasury yield continued to hover just below 3%. European and UK equities posted gains, as did the energy complex.
In FX, price action yesterday was dominated by month end flows, with better net supply of EUR. Italy also remained in focus due to headlines of early elections being called for by the Five Star Movement.
With most of Europe out on holiday today, we expect a quiet session.
As expected, the Reserve Bank of Australia (RBA) kept its cash rate unchanged at 1.50% this morning. It made no changes change to its guidance in today’s statement, but reinserted the reference to 3% growth in 2018-19.
The lack of change in guidance indicates that rate hikes are not in the vicinity. Barclays Research have pushed back their rate hike call to H1 2019, whilst not ruling out a move in November if data is stronger than expected in the interim.
UK PMI data this morning at 09.30 will be watched closely ahead of the BoE meeting on 10th May, after the initial estimate of UK Q1 GDP resulted in the market pricing a materially lower probability of a 25bp hike in May. We expect April manufacturing PMI to edge lower after having steadied in the last few months.