ASX 200 steadies as cooling CPI and bond yields ease RBA pressure
ASX 200 at A$8,660 after April CPI slowed to 4.2% and 10-year yield fell to 4.86%, leading markets to expect the RBA to hold rates at its June 16 meeting.
The ASX 200 traded at A$8,660, a few points below this week’s high of A$8,715, after Australia’s April consumer price index and government bond yields declined. Market pricing moved to reflect growing odds that the Reserve Bank of Australia will keep the cash rate unchanged at its meeting on June 16.
The Australian Bureau of Statistics reported headline CPI at 4.2% year on year in April, down from 4.6% in March and below the consensus estimate of 4.4%. On a monthly basis, CPI rose 0.4% in April after a 1.1% increase in March. The weighted mean CPI was 3.5% and the trimmed mean was 3.4%, both above the RBA’s 3%–4% target band.
Government bond yields fell after the inflation data and a separate labour market report. The 10-year government bond yield slid to 4.86%, its lowest level since April 8, after earlier reaching about 5.18%. The two-year yield dropped to 4.53%, the lowest since March 19 and below its year-to-date high near 4.92%.
The RBA has raised interest rates three times in the current tightening cycle. A jobs report last week showed the economy lost positions and the unemployment rate rose in April. Those data points factored into moves in bond markets and into market expectations for policy at the June meeting.
Housing and energy costs remain key contributors to Australia’s inflation. Fuel prices have trended higher since the escalation of conflict in the Middle East earlier this year, lifting global crude benchmarks and increasing local pump prices and transport costs.
On technical indicators, the ASX 200 sits about 6.15% below its year-to-date high and is trading slightly below both its 50-day and 100-day moving averages, which crossed in May. The index is between support at A$8,380 and resistance at A$9,083, with a nearer support level noted at A$8,488.
Regional markets diverged: South Korea’s Kospi and Japan’s Nikkei 225 were trading near record highs while the ASX remained below its peak. Investors will monitor upcoming Australian economic releases and the RBA’s June statement for further information on monetary policy and market implications.
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