All Eyes on the RBA as Oil Diplomacy Buys Time but Inflation Stays Stubborn

• Markets head into tomorrow’s RBA meeting priced for another move higher, with markets implying a 73% chance of a hike. The key question is whether the Board gives more weight to renewed global inflation risks from energy and trade tensions.
• March building approvals are due today and are expected to fall sharply after last month’s 29.7% gain, keeping focus on housing supply constraints and the broader domestic demand backdrop.
• Iran’s new 14-point peace proposal helped ease oil prices, but Trump’s sceptical response means the path to reopening the Strait of Hormuz remains uncertain. That leaves energy-led inflation risk as the main global macro theme.
• Rates markets were relatively steady despite the geopolitical noise, with the US 10-year Treasury yield around 4.37% as lower oil prices and hopes of diplomacy offset lingering inflation and trade concerns.
• US data continues to argue for caution from the Fed, with the April ISM manufacturing index holding at 52.7 and the prices paid component jumping to 84.6, the highest since April 2022, even as the employment component weakened.