US equities made fresh record highs as Fed officials continued to signal no change in stance is likely for some time. The S&P500 closed up 0.8%, and the US dollar and bond yields rose slightly. US PPI inflation in March beat expectations, at 1.0% (vs 0.5% expected), for an annual pace of 4.2%. The core measure was 0.7% m/m, 3.1% y/y.
Fed Vice-chair Clarida echoed Chair Powell's comments over the outcome based nature of the new policy framework, saying they are waiting for "hard numbers." He added that they do not expect to raise rates until substantial further progress on the goals is met, and that they will communicate as they see progress being made. The inflation rise this year is seen to be transitory. The strong jobs report was welcome but said there is still a deep hole. Kaplan also confirmed that policy is not going to be pre-emptive, although not so reactive that "we're late" in addressing any rising price. On inflation, he believes some of the expected rise will be transitory, but some may stick as the labour market improves.
Commodities, Brent crude oil futures fell 0.4% to $62.95, copper fell 1.5%, iron ore fell 0.1% to $172.30, and gold fell 0.7%.
Overnight Currency Ranges
AUD/USD 0.7588 0.7661
EUR/USD 1.1867 1.19205
GBP/USD 1.3670 1.3750
USD/JPY 109.21 109.96
NZD/USD 0.7010 0.7065
USD/CAD 1.2527 1.2610
USD/CNH 6.5505 6.5702
AUD/JPY 83.05 83.78
AUD/NZD 1.0824 1.0841
AUD/USD ended on Friday at 0.7617 and down by some 0.44% having fallen from a high of 0.7661 to a low of 0.7588. For the open, there has been little in the way of fundamental weekend news as a catalyst for traders seeking an opportunity. While Friday's North American equity markets finished the week with a positive tone, with the SPX gaining 0.8% and the DJIA hitting a fresh all-time high, technically, the pair may struggle to maintain a bid tone for long. That being said, a positive close on Wall Street leaves the pair's upside exposed due to its higher-beta status.
Moreover, the reassuring message from Federal Reserve officials over the course of last week will possible contribute to a positive risk sentiment start for the week. Meanwhile, the data ahead for the week will be important for both the USD and AUD. Particularly US Consumer Price Index and Aussie Unemployment.
Demand should slow any dip toward 0.7560 while offering interest should materialise as we reach a 0.7700 handle.
Event Risk Data Today
Euro Area: February retail sales are expected to partially reverse the 5.9% fall from January, but the extension of lockdowns into April will constrain spending (market f/c: 1.3%).
US: The March monthly budget statement will be released; the deficit will widen considerably as news waves of stimulus come online. The FOMC’s Harker, Daly, Mester, Bostic and Rosengren will speak.