FXTRADING Economic Data Summary (Asia-Pacific | 05/28)

The Reserve Bank of New Zealand chose to stay on hold

Although the Reserve Bank of New Zealand kept the Official Cash Rate unchanged at 2.25%, the overall tone of the meeting was clearly hawkish. What truly surprised markets was the 3-3 split vote within the Monetary Policy Committee, with Governor Anna Breman ultimately casting the deciding vote to keep rates unchanged. This indicates that support for an immediate rate hike within the central bank is growing significantly, while market expectations for a future policy shift have also risen rapidly.

The Reserve Bank of New Zealand expects annual CPI to rise to 4.3% in the September quarter and not return to the 2% target until around mid-2027. Rising energy, fuel, and petrochemical prices are gradually feeding into wages and corporate pricing. At the same time, the economic outlook has weakened noticeably, with 2026 GDP growth forecasts revised down by nearly one percentage point compared with February projections, while the housing market, employment, and business investment remain soft. FXTRADING believes the Reserve Bank of New Zealand is currently facing a classic stagflation environment. Inflation risks continue to rise while economic growth slows simultaneously. Under these conditions, the possibility of earlier rate hikes from the RBNZ is increasing significantly.

Australian inflation temporarily cooled

Australias headline CPI eased from 4.6% YoY to 4.2% in April, below market expectations of 4.4%, while the monthly reading also slowed from the expected 0.6% to 0.4%. Lower fuel prices were the main drag, with automotive fuel inflation falling from 24.2% to 18.6%, while goods inflation also declined from 5.5% to 4.7%.

However, core inflation has yet to show a meaningful slowdown. Housing inflation remained elevated at 6.3%, transportation costs rose 6.6%, and food and non-alcoholic beverage prices increased 2.8%. Meanwhile, trimmed mean CPI still reached 3.4% YoY, marking the highest level since mid-2024, suggesting that service-sector and housing-related price pressures remain persistent. FXTRADING believes the Reserve Bank of Australia will likely remain cautious in the near term. Although headline inflation has moderated, underlying price pressures remain stubborn, making it difficult for the RBA to fully pivot toward a dovish stance for now.

US consumption faces pressure from elevated oil prices

US consumer confidence slipped from 93.8 to 93.1 in May. Although the reading came in slightly above market expectations of 91.6, it still suggests that rising energy prices are gradually reducing household purchasing power. While the US economy has not yet shown clear signs of recession, consumers have started to become less optimistic about current economic conditions.

The Present Situation Index fell from 124.4 to 121.2, reflecting growing concerns among households regarding employment, income, and the business environment. However, the Expectations Index edged up slightly from 73.4 to 74.4, indicating that markets still maintain some degree of optimism about stability over the next six months. The Conference Board believes inflation and energy pressures linked to Middle East tensions are major factors weighing on consumer confidence. FXTRADING believes the US consumer sector still retains a degree of resilience, but elevated oil and transportation costs are gradually eroding household purchasing power. If energy prices remain elevated, consumer-related data could weaken further in the coming months.

The European Central Bank is becoming increasingly clear about a June rate hike

Recent comments from ECB Chief Economist Philip Lane further strengthened market expectations for a June rate hike. He stated that markets already fully understand the ECBs policy direction, meaning there is no need to provide additional forward guidance. This suggests that policymakers within the ECB have become more united in supporting further monetary tightening.

Lane also acknowledged that the energy shock caused by Middle East tensions is worsening the Eurozone inflation outlook. The ECB is increasingly concerned that elevated oil prices may persist much longer than previously expected. Even though US natural gas exports may help ease some supply pressures, energy prices are still expected to continue pushing inflation higher across the Eurozone. FXTRADING believes the ECBs vigilance toward inflation risks is clearly intensifying. As long as energy prices remain elevated, Eurozone inflation is unlikely to decline quickly, and market expectations for further rate hikes may continue to strengthen.