11th March 2021 - AUD rebounds as attentions now turn to the ECB

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Market Headlines

US equities rose further, the S&P500 currently up 0.7%, and bond yields retreated further. US inflation data was slightly weaker than expected, supporting the Fed’s accommodative stance. US 2yr treasury yields roundtripped from 0.16% to 0.17% and back, while the 10yr yield initially rose from 1.54% to 1.57% but then fell to 1.50% following the CPI data.

Commodities, Brent crude oil futures fell 0.1% to $67.40, copper rose 0.6%, iron ore rose 0.4% to $164.00, and gold rose 0.4%.

The US House passed President Joe Biden’s stimulus bill, which he intends to sign next Friday at the White House. The headline gave a late boost to stocks, with Wall Street posting substantial gains. President Biden is also due to deliver a prime-time address on Thursday marking the 1-year anniversary of the coronavirus-related shutdowns.

The focus now shifts to the ECB Monetary Policy decision this evening.

Overnight Currency Ranges

AUD/USD 0.76685 0.7746

EUR/USD 1.1869 1.1925

GBP/USD 1.3846 1.3934

USD/JPY 108.34 108.92

NZD/USD 0.7133 0.7199

USD/CAD 1.2614 1.2683

USD/CNH 6.5022 6.5282

AUD/JPY 83.44 83.91

AUD/NZD 1.0743 1.0761

AUD Thoughts

Attentions now turn toward the ECB, there has been uniformity of ECB members’ remarks regarding the rout in global bond markets means markets know exactly what to expect at this evening’s ECB meeting. The ECB’s reiterated on the March 3 that there is flexibility within the PEPP asset purchase programme and that the central bank stands ready to react to any unwarranted tightening in financial conditions.

The AUD peaked at 0.7746 overnight with offering interest still expected above 0.7760 and again ahead of 0.7820 while demand has likely grown back toward 0.7650.

Event Risk Data Today

Australia: The March update of MI inflation expectations will be released. The survey has improved 0.6ppt since the trough of the crisis.

New Zealand: The February food price index is expected to rise by 0.5% ; annual inflation has eased since mid-2020. REINZ housing data for February should reflect continuing solid demand.

Euro Area: The ECB will announce the decision of its March policy meeting. Markets will be looking for commentary around the recent bond market selloff, and whether the ECB will be willing to tweak the parameters of its PEPP to dampen yields. The Bank will also publish its latest set of economic forecasts.

US: The market expects that initial jobless claims will print around 725k, after ticking higher on weather disruptions last week. JOLTS job openings are set to hold around 6650, with the recent rise led by business services and retail trade.

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