Greater Global Economic Integration Needed
Markets are getting a little bit of a unified bounce off the olive branch comments Chinese President Xi Jinping made in a video speech at the Boao Forum today. Calling for greater global economic integration and warning against decoupling, Xi said:
“International affairs should be conducted by way of negotiations and discussions... One or a few countries shouldn’t impose their rules on others, and the world shouldn’t be led on by the unilateralism of a few countries."
In a critique of US efforts to reduce dependence on Chinese supply chains and withhold exports of goods, like advanced computer chips, Xi said:
“any effort to build barriers and decouple works against economic and market principles, and would only harm others without benefiting oneself.”
Dovish RBA Minutes
The minutes of the RBA’s Apr. 6 monetary policy meeting reflect the dovish tone of the policy statement.
The AUD faces cross-currents between a pro-active central bank prepared to lean firmly against higher yields and a positive backdrop for risk-taking. But as a catch-up theme too early for April underperformance, the AUD is attractive in the near term, having lagged broader G10 moves vs. the USD.
Recovering industrial metal prices and robust trends in US equities—two historically important AUD drivers—should support the currency. Indeed, front-month copper prices are up 6.7% month to date, following a 5.7% decline in March and only 1.1% off the 2021 high.
One of the interesting takeaways from the policy statement was a new focus on Australia’s housing market. The minutes fleshes out these observations:
“Given the environment of rising housing prices and low-interest rates, the Bank would be monitoring trends in housing borrowing and the maintenance of lending standards carefully.”
The RBA, however, deems rising house prices in Australia as less of an issue than other countries, implying less impetus to raise policy rates:
“In Australia, growth in both housing credit and housing prices had picked up, but to a lesser extent [and]… there was no notable evidence of a deterioration in housing lending standards.”
On monetary policy, the Board was non-committal on moving away from targeting the April 2024 bond: “…members would give close attention to the flow of economic data and the outlook for inflation and employment.”