Wall Street fell at the opening amid a sell-off led by techs shares but trimmed most of its early losses ahead of the close after US Federal Reserve head Jerome Powell testified on monetary policy before Congress. Powell said that it would take time for “substantial further progress” towards the central bank goals on employment and inflation while adding that any change to the bond-buying program will be communicated "well in advance." He also acknowledged better data coming in, but reiterated that the economic recovery slowed in recent months.
US 2yr treasury yields remained around 0.11%, and the 10yr yield ranged sideways between 1.34% and 1.39%, the latter being the high since March 2020. Australian 3yr government bond yields (futures) remained around 0.26%, while the 10yr yield rose from 1.60% to 1.66% - the highest since March 2020.
Commodities, Brent crude oil futures rose 0.3% to $65.45 – a 12-month high, copper rose 1.0% - a 9-year high, and gold fell 0.3%
Overnight Currency Ranges
AUD/USD: 0.7881 – 0.7923
EUR/USD: 1.2135 – 1.2180
GBP/USD: 1.4055 – 1.4117
USD/JPY: 105.05 – 105.43
USD/CAD: 1.2586 – 1.2647
NZD/USD: 0.7308 – 0.7341
AUD/JPY: 82.90 – 83.29
AUD/NZD: 1.0776 – 1.0827
The AUD/USD pair touched its highest level in nearly three years at 0.7983 on Tuesday but failed to preserve its bullish momentum, AUD now steadies around 0.7915 post Powell's testimony. Looking forward AUD seems to be in a relatively tight 0.7881/0.7934 range yesterday with demand expected to materialise on any dip back to 0.7820 while offering interest should intensify if we approach 0.8000.
Event Risk Data Today
Australia: Wages growth slowed to 0.1% in Q3, with a number of sectors reporting outright declines in hourly wages. The market expects that the momentum of the economic recovery into yearend, combined with the progressive relaxation of wage freezes, will see the Q4 wage price index lift 0.3%. For Q4 construction work, the markets anticipates a rise of 0.7%, which would see work down by only 0.6% for the year. The strength in Q4 will be centred on housing and public works. Private commercial building and infrastructure will likely fall, reflecting sharp drops in approvals. Public works, 25% of the total, are forecast to rise by 2% in Q4 and to be 6% higher than a year ago.
New Zealand: The market expects that the RBNZ MPS will announce no further changes today. The RBNZ will acknowledge that there is now less need for monetary stimulus than it thought at its November review. GDP, inflation, employment, commodity and houses prices have been stronger than forecast. However, the RBNZ will also note that current policy settings are about right and accommodation should remain in place for some time.
US: New home sales are at a 10 year high ahead of the January update, although affordability is beginning to crimp turnover. Fed Chair Powell will continue his semi-annual testimony before Congress; day 2 will be in front of the House Financial Services Committee (02:00 AEDT). The FOMC’s Brainard (02:30 AEDT) and Fed Vice Chair Clarida will speak (05:00 AEDT). Clarida will speak again at a virtual event hosted by AmCham Australia and the ABE (08:00 AEDT).