Equities sagged slightly further, the S&P500 down 0.5%. The US dollar fell against all the majors, while bond yields were rangebound. There was little news to drive markets. Commodities, Brent crude oil futures fell 1.0% to $68.80, copper rose 0.3%, and gold rose 0.2%, while iron ore rose 4.4% to $223.05. The bi-monthly GDT dairy auction resulted in an overall price fall of 0.2%, with whole milk powder also down 0.2% (vs earlier futures market predictions of a 2% gain).
Overnight Currency Ranges
AUD/USD 0.7764 0.7813
EUR/USD 1.2153 1.2234
GBP/USD 1.4135 1.4220
USD/JPY 108.83 109.28
NZD/USD 0.7211 0.7271
USD/CAD 1.2014 1.2081
USD/CNH 6.4179 6.4430
AUD/JPY 84.75 85.14
AUD/NZD 1.0742 1.0774
AUD/USD picks up bids around 0.7800, keeping the latest range between 0.7780 and 0.7815, amid the early Wednesday morning trading. The Aussie pair jumped to 0.7815 amid Tuesday’s Asian session as RBA minutes and upbeat sentiment favoured bulls. However, a lack of clear direction and cautious sentiment ahead of today’s US Federal Open Market Committee (FOMC) meeting minutes seem to have pulled the quote back towards 0.7780, before the latest bounce that portrays sideways moves.
Vaccine optimism joined hopes of further stimulus and downbeat US data to favour the risk-on mood but Geopolitical and virus-related fears, coupled with the pre-event caution chained the bulls. Also on the positive side was the RBA minutes while the Aussie-China tussles occupied the alternative end. US President Joe Biden’s readiness to shares authorized covid jabs with the countries in need and China’s push for the coronavirus (COVID-19) vaccine patent waiver join Moderna and Pfizer updates suggesting a cure to the Indian variant of the deadly virus to portray vaccine optimism.
Elsewhere, RBA minutes turned down odds to use yield curve control even if needed while reiterating no rate hike before 2024. On the other hand, US Housing Starts and Building Permits for April came in weaker. Furthermore, the Middle East tension continues and so do Canberra-Beijing tussles. On the same line were pessimism concerning the virus spread in Asia and Indian variant of the covid in the West.
AUD/USD traded firmly overnight although once again failed ahead of the 0.7815/20 resistance while downside support remains back toward 0.7680.
Event Risk Data Today
Australia: The May Westpac-MI consumer sentiment survey was in the field over the week to 15 May. It will capture reactions to the Federal Budget – likely to be positive given stimulus measures and the over-arching aim of 'going for growth'. Other developments also look likely to be mostly positive with another strong jobs report (the unemployment rate dropping to 5.6% in March), the ASX pushing towards new highs on a surge in iron ore prices, and housing markets continuing to boom (although this can be a 'wedge' issue for sentiment). The vaccine roll-out also looks to be gaining more traction. Concerns about worsening trade relations with China may take some of the gloss off. Following this, the ABS will publish the Q1 Wage Price Index. Reinstatements of Covid wage reductions are likely to be a factor again in the March quarter, masking underlying momentum in wages. We have pencilled in a 0.6%qtr rise in the headline WPI.
UK: Annual CPI inflation is expected to jump to 1.5% in April on base effects, with much of the economy shuttered this time last year. Monthly CPI growth is set to print at 0.6%.
UK: FOMC minutes