US Fed holds as expected; US data weaker; Bank of Canada holds; Malaysia walks away from US tariff deal; Korean strike threat another supply chain risk; UST 10yr at 4.26%; gold drops; oil rises; AU$1 = 70.8 USc

Here's our summary of key economic events overnight that affect Australia with news deeper turmoil in the Middle East has overshadowed the US Fed meeting.

But first up, in an 11-1 vote, the US Federal Reserve decided to hold its policy rate unchanged at 3.25% at todays meeting. Only Trump's insert, Stephen Miran, voted against the consensus. The immediate response from financial markets wasn't large, probably because this is the expected result. While their dot plot signals a rate cut this year, markets do not have that priced in. In fact the futures market is looking for rises. But after they thought more about it, markets are now pricing in higher benchmark rates, lower equity prices, and a stronger USD on risk aversion.

Elsewhere in the US, mortgage applications sank last week by almost -11% as rising mortgage rates killed off demand. Almost off of this pullback was for refi demand

American producer prices surged +0.7% in February from January to be +3.4% higher than year-ago levels. That is the biggest rise in more than a year. If you just isolate producer prices to 'goods' only, the jump was noticeably more, up +1.1% just in one month.

That makes the January factory order data look rather weak. They were up just +0.1% from a month earlier, up +3.5% from a year ago. So almost all of this is accounted for by inflation, and the recent order level growth is far less than recent inflation.

Financial markets noticed and sagged.

US crude stocks rose and by more than expected last week, but this had little impact on the rising oil price. But US domestic petrol inventories dived last week in a major way. Making this notable was it was the fifth consecutive weekly drop.

The Bank of Canada left its overnight target rate steady at 2.25% in its March meeting, as expected.

Staying in Canada, they reported that their 41.5 mln population declined by more than -100,000 in 2025 mainly due to an exodus of foreign workers..

Meanwhile the Japanese Reuters Tankan Index rose to 18 points in March from 13 points in February and its highest (non-pandemic) level since 2019.

In South Korea we should note that a 66,000 member union has voted to strike at a major Samsung electronics facility in May. If it happens, it will be yet another supply chain disruption for a key global electronics supplier. This is a company union, and only the second time in its history it has voted to strike, so there must be deep dissatisfaction involved.

In Malaysia, they became the first country to confirm that their special trade pact with the US is now 'void' following the US Supreme Court's tariff ruling. It will likely trigger a cascade of other countries declaring the same.

In China, new official data out shows that cement production surged in February, back to 2023 levels, and perhaps a solid indication that construction activity is picking up, after a long two-year low period.

Here iIn Australia, the six-month annualised growth rate in the Westpac–Melbourne Institute Leading Index, which indicates the likely pace of economic activity relative to trend three to nine months into the future, held at +0.08% in February, unchanged from January but down from more firmly positive reads seen late last year. Of course, this metric covers periods before the US-Iran war.

Meanwhile, Far North Queensland is being warned to brace for Tropical Cyclone Narelle, forecast to make landfall as a category four or five system on Friday morning, with destructive wind gusts of up to 250 kph !!

Generally, we should probably note that the USD's steady devaluation against the Chinese yuan seems to have ended, with the rate holding steady for the past few weeks.

The UST 10yr yield is now just on 4.26%, up +6 bps from yesterday at this time, littel-changed after the Fed decision. The key 2-10 yield curve is flatter at +54 bps (-3 bps). Their 1-5 curve is steeper at +18 bps (+3 bps) and the 3 mth-10yr curve is now at +54 bps (+4 bps). The China 10 year bond rate is little-changed at just over 1.82%. The Japanese 10 year bond yield is down -5 bps at 2.22%. The Australian 10 year bond yield starts today at 4.93%, up +3 bps from yesterday.

Wall Street ended Wednesday trade with the S&P500 down -1.3% after the Fed decision. Overnight, European markets were also lower, between London's -0.9% and Paris's -0.1%. Yesterday, Tokyo closed up a very sharp +2.9%. Hong Kong ended its Wednesday session up +0.6%, and Shanghai rose +0.3%. Singapore ended up another +1.3%. The ASX200 closed up +0.3%. 

The price of gold will start today down -US$121 from yesterday at US$4880/oz. Silver is down -US$2.50 at US$77/oz.

American oil prices are up almost +US$3, at just under US$98/bbl, while the international Brent price is up +US$6, now just over US$108/bbl. The Straits of Hormuz remain no-go areas for most with the situation still extremely unstable. The ships transiting are those approved by Iran, which holds all the cards at present. The Israeli attack on Iranian gas fields has delivered a large spike in natural gas prices.

The Australian dollar has dropped today, down -30 bps against the USD from yesterday, now just on 70.8 USc. Against the Japanese yen we are down -20 bps at ¥112.9. Against the euro we are down -10 bps at 61.5 euro cents. 

The bitcoin price starts today at US$71,293 and down -3.9% from this time yesterday. Volatility over the past 24 hours has been moderate at just on +/- 2.8%.