ECB’s Makhlouf stated on Wednesday that the long-term effects of U.S. tariffs and potential countermeasures on the euro-area are uncertain, but they pose a near-term negative impact on the region’s economic outlook and a downside risk to inflation. He noted that trade flow diversions, particularly from China and the EU, could influence inflation pressures. Additionally, Makhlouf confirmed the ECB will continue its meeting-by-meeting approach to monetary policy decisions.

The Bank of Japan held steady on rates as widely expected, but delayed the 2% inflation target due to increased external uncertainties. Clearly this is having an impact on price action, with the yen under pressure in the aftermath. Other data highlighted includes manufacturing PMIs showing an ongoing contraction, with declining orders and exports, leading to reduced purchasing and inventory adjustments. Meanwhile, business confidence is at its lowest since the mid-2020s due to global trade and demand concerns. Recovery hinges on stronger domestic and international demand.

The STIR market anticipates steady RBA rate cuts in 2025, pricing in a 27bp reduction for the May 20 meeting—fully expecting a 25bp cut—and a total of 112bp by year-end, suggesting a possible fifth cut, though this seems optimistic given uncertainties around tariffs and inflation. Australian trade data for March revealed a larger-than-expected surplus of A$6,900 million, driven by a 7.6% rise in exports, particularly non-monetary gold (+25.9%) and general merchandise (+5.6%), while imports fell 2.2%. Q1 terms of trade showed rising export and import prices, boosted by a weaker Aussie dollar, with export prices up 2.1% due to gains in metalliferous ores (+5.4%) and gold (+12.4%), fueled by Chinese growth optimism and global uncertainty.