The Aussie tumbled sharply today on lower than expected inflation data. Headline CPI rose 0.6% qoq, 2.9% yoy in Q1. The yoy reading showed acceleration from prior quarter's 2.7% but that was below market expectation of 3.2%. Note that the RBA's target range for inflation is 2-3% and today's data showed inflation is staying in the range rather than exceeding it. Meanwhile, the RBA trimmed mean CPI was unchanged at 2.6% yoy versus expectation of 2.9% yoy. Weighted mean CPI rose to 2.7% yoy versus expectation of 2.9% yoy. Today's data won't affect RBA's neutral stance to keep rates unchanged for a period of time. However, there was some talk that RBA could begin normalization of rates early next year. The current inflation outlook could afford RBA some more time and delay the normalization.
Released from China, the HSBC manufacturing PMI rose slightly to 48.3 in April, inline with expectations. While that was an improvement over March's 48.0, the reading stayed in contractionary region. While probably neglected by most market participants, the State Council of China announced a RRR cut for qualified rural banks earlier this week. This is likely a form of easing measure that the government implements to support a specific sector and boost market sentiment. Yet, the direct impact of the cut on the overall banking system and liquidity will be limited.
Looking ahead, Eurozone PMIs are a major focus in the European session with French, German and Eurozone readings featured. UK will release BoE minutes and it's expected to show unanimous vote to kept rates at 0.5% and asset purchase size at GBP 375b. UK will also release public sector net borrowing. Later in the data, Canada will release retail sales and US will release new home sales.