Overnight Market Headlines
· Markets did not get hints of possible rate cuts from the Fed, causing US bond yields and the USD to rise in response. US equities initially made record highs but retreated after the Fed, the S&P500 currently down 0.6%.
· The chance of a Fed rate cut by December, implied by Fed fund futures, decreased from 100% to 70%.
· Gold prices edged lower - Spot gold was down 0.3% to $1,279 per ounce after commentary from Fed Chair Powell.
· China's iron ore futures rose and posted 5th straight monthly gain - construction steel marked its best month since July 2018, buoyed by hopes demand will remain firm after the holidays. Spot iron ore for delivery to China was steady at $95.00.
· Aluminium and lead prices slid to their lowest in more than two years as computer-driven funds sold after an options expiry amid concerns about demand in China.
· LME copper slumped 2.8% to finish at $6,235 per tonne, the weakest since Feb. 18.
· Oil futures ended little changed after supply curbs, including further talk on an extension to OPEC-led cuts, offset rising U.S. crude inventories and record production.
· The US dollar index is up 0.2% on the day, rising from 97.20 up towards 97.65
· EUR initially rose to 1.1265, helped by disappointing US manufacturing data, but fell to 1.1187 following the Fed
· USD/JPY initially fell from 111.55 to 111.05 but rebounded to 111.60 post-Fed.
· AUD fell from 0.7060 to 0.7007 after the Fed commentary
· NZD, which yesterday shed 0.5c, fell from 0.6665 to 0.6616 post-Fed
· AUDNZD slipped from 1.0610 to 1.0580
· AUDEUR continued its descent lower, falling towards 0.6250 lows
Like all other G10 currencies, AUD/USD also trims some of its past-FOMC losses as it trades near 0.7015 during the early Asian session on Thursday. The Aussie pair couldn’t withstand Fed’s Powell’s avoidance of hinting catalysts for a rate cut and tanked with all other majors during the aftermath of the US Federal Reserve decision.
Except for a 5 basis point reduction into the interest on excess reserves (IOER) rate, the Fed announced no change in its current monetary policy on Wednesday. The US central bank did upwardly revised growth outlook while downplaying inflation.
However, Chairman Jerome Powell turned out as a show-stopper by terming recent inflation moves as temporary, being optimistic about the economic growth and giving less importance to the factors that could give rise to an interest rate cut by the Fed.
In spite of registering more than 50 pips losses after the FOMC, the Aussie refrained from declining below an upward sloping trend-line stretched since January 04.
March month figures of HIA new home sales from Australia will gain the immediate attention of the pair traders. The housing market gauge rose 1.0% in its latest data.
It should also be noted that the market’s risk sentiment is also struggling as the US 10-year Treasury yields remain near 2.5% after registering one basis point of gain to 2.51% by the end of Wednesday.
Furthermore, the US and China are moving fast on their trade discussions. Recent news suggests that both the world’s largest economies are ready to step some of the previous tariffs back from each other’s products in order to give an additional positive boost to the chances of a trade deal.
While the absence of Chinese and Japanese players from the market may hinder liquidities of Asian currencies, the European and the US sessions could entertain momentum traders.
Unless breaking 0.7000 trend-line support, chances of witnessing 0.6980 and 0.6910 remains less.
On the upside, 0.7030, 0.7055 and 0.7070 may act as nearby resistances ahead of 50-day simple moving average (SMA) level of 0.7100.
Risk Event Today
· AU Housing Data
· NZ: March building permits are expected to pull back from a strong Feb result, but leave a positive trend intact.
· UK: The BOE policy meeting is expected to maintain their mild tightening bias and reiterate the conditionality of their forecasts with the Brexit process still unresolved.
· US: Mar factory orders follows the robust read on preliminary durable goods orders.