News

Morgan Stanley has revised its Fed forecast to expect the central bank will hold interest rates steady throughout 2026, suggesting the Fed may be done cutting after the current easing cycle. This matters because rate expectations directly influence bond yields, currency valuations, and equity multiples—higher for longer would support financials but pressure growth stocks. For Australian investors, a higher USD/lower rate-cut narrative typically strengthens the US dollar and affects AUD, while also influencing RBA policy thinking.

US Q1 GDP expanded 2.0%, undershooting economist expectations and signalling cooling momentum in the world's largest economy. More concerning is the upside surprise in price pressures—inflation remains sticky despite the Fed's rate-hiking cycle. This mixed data creates a policy dilemma: weaker growth argues for rate cuts, but persistent inflation may keep the Fed holding rates higher for longer. For Australian investors, a slower US economy typically pressures commodity prices and growth stocks, while a stronger USD (likely on hawkish Fed signals) weighs on AUD and export-exposed companies.

Canada's economy expanded 0.2% month-on-month in February with annualized quarterly growth tracking around 1.7%, suggesting modest momentum but well below historical trends. This data matters because it influences Bank of Canada policy decisions and the CAD exchange rate—a softer growth picture could support rate-cut expectations. Australian investors exposed to Canadian equities or holding CAD should monitor whether this cooling justifies BoC easing, which would weaken the loonie and affect cross-currency hedging costs.

Marathon Holdings (MARA) is acquiring Long Ridge Energy for $1.5 billion to expand its AI data center footprint, signalling aggressive expansion in the high-margin AI infrastructure sector. This consolidation reflects strong investor appetite for data center assets powering AI workloads, though the deal's financing and integration risks warrant monitoring. For Australian investors, this highlights the global AI infrastructure arms race and potential opportunities in energy and technology stocks exposed to data center buildouts.

Australia's core inflation holding at 3.2% in March aligns with RBA expectations, suggesting price pressures remain sticky above the 2-3% target band—this reinforces the case for the central bank to keep rates higher for longer. Combined with solid 2% quarterly GDP growth, the data paints a picture of an economy growing at trend but still wrestling with inflation, which limits the RBA's room to cut rates despite softer labour market signals. Australian bond yields will likely hold firm, supporting the AUD and keeping pressure on growth-sensitive sectors like consumer discretionary and property.

US core PCE inflation (the Fed's preferred measure, excluding volatile food and energy) came in as expected in March, suggesting inflation is cooling toward the Fed's 2% target. This is significant because it reduces pressure on the Federal Reserve to continue aggressive interest rate hikes, which strengthens the case for holding rates steady or cutting later in the year. For Australian investors, softer US inflation typically supports tech stocks and growth equities globally, while also potentially pushing the US dollar lower—making US assets cheaper in AUD terms and benefiting our export-oriented companies.

U.S. core PCE inflation—the Fed's preferred inflation gauge—spiked to a 3-year high in March, driven partly by geopolitical supply shocks (Iran tensions). This undermines the Fed's case for interest rate cuts and complicates monetary policy: officials face a dilemma between supporting economic growth and containing price pressures. For Australian investors, higher U.S. rates typically strengthen the USD (pressuring the AUD), raise global borrowing costs, and risk dampening growth—all factors that could weigh on the ASX, particularly tech and rate-sensitive sectors. Watch for Fed messaging at upcoming meetings to gauge whether they'll hold rates steady longer than previously signaled.

Bank of England Governor Andrew Bailey has characterised the BoE's current interest rate pause as an 'active hold'—meaning rates could move in either direction depending on incoming data—while warning that energy price volatility remains a key risk to inflation control. This language suggests the BoE isn't done tightening and is keeping policy optionality, which could support GBP in the short term if market expectations shift toward further hikes. For Australian investors with UK exposure or those watching cross-currency dynamics, this reinforces that major central banks remain alert to inflation risks; the rhetoric also matters for commodity currencies like AUD relative to GBP and USD.

Deloitte's analysis suggests the Albanese government's proposed compromise on capital gains tax reform—limiting changes to new investments only—would severely weaken the policy's fiscal impact, generating just $500m over four years versus much larger estimates under full implementation. This matters because CGT reform is central to Labor's budget repair strategy, and grandfathering existing investments reduces both revenue and the policy's intended incentive effect on asset allocation. Australian investors holding established property and share portfolios would face less disruption under this approach, but the government may face pressure to broaden the reform, creating uncertainty for property investors and fund managers ahead of any legislative detail.

The European Central Bank held interest rates unchanged but signalled concern about persistent inflation amid weakening economic growth—a classic policy dilemma. This mixed messaging suggests the ECB is cautious about further rate hikes, which could weigh on the euro and support equity markets expecting lower rates ahead. Australian investors should note this keeps divergence with the RBA's trajectory relevant; a dovish ECB could support risk assets globally, but also pressures the AUD through interest rate differentials.

The Bank of England held rates steady but signalled higher inflation ahead—likely from US tariffs and geopolitical tensions—which may force rate rises later. This matters for Australian investors because UK policy divergence affects global growth, currency flows, and inflation expectations across developed markets. Watch for BoE forward guidance in coming months and how UK inflation data tracks their forecast; a sharper-than-expected rise could ripple through AUD/GBP and influence RBA thinking on Australian rate cuts.

Canada is establishing a dedicated Financial Crimes Agency and tightening crypto ATM regulations following a public inquiry into anti-money-laundering deficiencies. While this is primarily a Canadian regulatory move, it signals stricter enforcement in a major financial hub and may create compliance costs for financial institutions operating across North America. Australian investors should monitor whether similar regulatory tightening spreads to ASIC and local financial crime enforcement, particularly for fintech and crypto-exposed sectors.

Big Tech's push into AI infrastructure—particularly agentic AI systems—is driving demand for unglamorous but critical industrial backbone companies: chip designers, networking equipment makers, and power/cooling solution providers. These suppliers are capturing outsized margins as data centre operators race to scale compute capacity, making them the real beneficiaries of AI capex rather than consumer-facing apps. For Australian investors, this underscores that AI exposure doesn't require betting on flashy software plays; infrastructure and semiconductor plays offer more stable cash flows with structural tailwinds from AI buildout.

The US Treasury has seized approximately $500 million in Iranian cryptocurrency assets, expanding on earlier enforcement actions. While this represents a significant enforcement win for the US government against Iranian sanctions evasion, it has limited direct impact on mainstream markets—the crypto assets seized are unlikely to flood markets (they'll remain frozen). The move does underscore increasing US regulatory scrutiny of crypto as a sanctions-circumvention tool, which could prompt stricter compliance requirements for crypto exchanges and custodians globally, including Australian platforms. For investors, this signals the US is getting better at tracking digital assets used by state actors, which may indirectly support crypto market legitimacy by reducing illicit use.

Eli Lilly reported Q1 revenue of $19.8B, beating expectations driven by volume growth despite ongoing pricing headwinds in the pharmaceutical sector. The company's forward guidance also exceeded analyst estimates, suggesting confidence in its pipeline and market demand for its products. For Australian investors, this is relevant context for global healthcare exposure and the strength of large-cap pharma; however, direct ASX impact is limited unless held via international ETFs or as part of US equity portfolios.

The Bank of England maintained its base rate at current levels but flagged geopolitical risks from Iran tensions as a potential inflation driver—particularly through oil price shocks. This signals the BoE is concerned about stagflation risks and may limit future rate cuts if energy prices spike. For Australian investors, a softer GBP (if BoE stays on hold longer than expected) could weigh on AUD carry trades, while energy price pressures could flow through to ASX-listed commodities and hit consumer discretionary spending if petrol costs spike.

The Bank of England held rates steady at 3.75% but signalled that higher inflation is 'unavoidable' due to Middle East geopolitical tensions, with the MPC hinting at potential rate hikes later in 2025. This hawkish hold suggests the BoE sees inflation risks ahead despite current economic uncertainty—a shift from its previous dovish tilt. For Australian investors, a stronger case for UK rate hikes could support GBP and potentially boost yields on UK assets, while also reinforcing that global central banks remain wary of inflation, which may influence RBA policy thinking as commodity prices and energy costs stay volatile.

Eli Lilly's GLP-1 drug sales (Mounjaro for diabetes, Zepbound for weight loss) nearly doubled and exceeded forecasts, driving the stock higher. This validates the massive market opportunity in GLP-1 medications and Lilly's execution ability—a trend that's reshaping the pharmaceutical and obesity treatment landscape globally. For Australian investors, this matters because Lilly is a major US pharma play often held in diversified portfolios, and the GLP-1 boom could sustain growth for years as these drugs gain regulatory approvals and market penetration in Australia and beyond.

Markets are now pricing in higher US federal funds rates persisting through 2027, suggesting expectations that inflation will remain sticky or that the Fed will need to maintain restrictive policy longer than previously thought. This reversal of rate-cut expectations is significant for Australian investors—higher US rates typically support the US dollar, pressuring the AUD, and flow through to Australian bond yields and equity valuations. Watch Fed speakers' next communications and upcoming inflation data (CPI) to confirm whether this repricing reflects genuine economic strength or is simply noise from short-term market volatility.

Renewed geopolitical tensions in Iran are triggering a flight to safety, with emerging market equities and currencies selling off as investors reduce risk exposure. This matters because escalating Middle East conflict typically pushes oil prices higher and increases volatility across EM assets—relevant for Australian investors given our energy exposure and the ASX's weight in commodity-linked stocks. Watch whether tensions escalate further, as sustained risk premium could support AUD weakness and boost energy stocks, though initial market direction is clearly risk-off.