Even Tiger Woods Augusta win could not help the malaise settling over equity markets. The DJIA fell 0.1% to 26,385, the S&P 500 Index was down 0.1% to 2,906. The financial sector led the modest decline as Goldman Sachs and Citigroup presented mixed quarterly results. Even stronger Chinese export data and US regional manufacturing activity provided little excitement. Goldman Sachs reported Q1 EPS of $5.71, above the $4.89 consensus, as revenues declined 13.0% y/y to $8.8 billion, below the projected $8.9 billion. GS stated that it is satisfied with its performance in 1Q, considering the weak trading start to 2019. VIX index moves lower to 12.20 and FX volatility faded further with only fringe EM providing excitement. With news flow limited and volatility, nonexistent USD continues to dominate Euro and CHF as negative yields weigh on directional trades. Chatter about EU elections or EU centric threats (Spanish & elections etc.) is now being faded with markets focused on ECB policy decisions. But this is now the global theme driving asset prices. With the fear of normalization gone (markets are now pricing in rate cuts by the Fed and the ECB), loose monetary policy will prop-up risk-taking. Traders should avoid cyclical repricing due to short-term headlines and focus on structural central bank actions. Case in point 1Q PBoC monetary policy meeting less dovish press statement. Given this thinking, we would reload on risk on pullbacks.

Aussie under pressure as RBA turns dovish

Things have changed rapidly in the past few months. Initially considering a rate hike for 2019, the Reserve Bank of Australia (RBA) has finally changed its rhetoric, gradually turning from a hawkish to neutral and finally reversing towards a dovish bias. The Australian economy continues to face heavy contradictions, with a solid labor market on one hand and a slackening property market on the other, putting the government under pressure ahead of 18 May 2019 general elections.

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According to recent national poll survey, 2019 elections are expected to be tight, with a slight advantage provided to PM Scott Morrison Coalition’s (Liberal and National parties’ coalition) opponents from Australian Labor Party. Yet challenges remain as inflation is expected to have declined in 1Q 2019 while weak wage growth and high household debt remain major drawbacks for the RBA. The policy minutes are therefore pointing towards a more dovish policy stance for the year while a first rate cut could occur as early as June 2019. Following the publication of the minutes, the Aussie is the largest loser among G10 currencies. AUD/USD trades at 0.7145, approaching 0.7130 short-term.

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