Overnight market sentiment was helped by some dovish Fed-speak from Powell and Williams. The S&P500 is currently up 0.5%, the US dollar is weaker, and commodities are higher; while bond yields are slightly lower, disappointing US manufacturing data weighing.
Commodities: Brent crude oil futures rose 1.1% to $67.50, copper rose 1.5%, and gold rose 1.3%, while iron ore futures (TSI) rose 0.5% to $185.04 – a decade high for this instrument – after some analysts forecast record highs helped by strong Chinese steel production.
Overnight Currency Ranges
AUD/USD 0.7708 0.7766
EUR/USD 1.2013 1.2076
GBP/USD 1.3803 1.3931
USD/JPY 108.90 109.69
NZD/USD 0.7156 0.7212
USD/CAD 1.2266 1.2318
USD/CNH 6.4684 6.4831
AUD/JPY 84.26 84.74
AUD/NZD 1.0754 1.0787
The US dollar index is down 0.4% on the day. EUR rose from 1.2020 to 1.2076. USD/JPY fell from 109.70 to 108.90. AUD rose from 0.7706 to 0.7767. NZD rose from 0.7156 to 0.7212. AUD/NZD rose from 1.0750 to 1.0790.
US ISM manufacturing survey for April disappointed at 60.7 (vs est. 65.0, prior 64.7), possibly due to supply chain disruptions, although it dies remain at an elevated level. Construction spending in March rose 0.2% (vs. est. 1.6%, prior -0.6%), home improvement notable weaker than expected.
Fed Chair Powell repeated comments from last week’s FOMC press conference: the recovery is strengthening, and the outlook has improved, but the recovery is uneven with long-standing disparities weighing on the productive capacity of the economy.
FOMC member Williams echoed these thoughts: The Fed is still far from achieving its goals and there is still a long road ahead. There has not been enough good news for the Fed to change its policy stance, even though economic growth could be 7% this year and inflation could briefly rise beyond 2%. The economy needs sustained job gains.
Event Risk Data Today
Australia: Housing finance consolidated in Feb after a huge 76% gain since the COVID low back in May last year. Approvals are well above previous pre-COVID peaks with a reopening 'catchup' boosted by additional stimulus coming from policy. The market expects that some of this will wane in March and are looking for total finance approvals to be up 2% in the month. In particular, construction related finance, associated with the Federal Home Builder scheme is likely to have passed its peak, but momentum across the rest should remain strong. Australia's trade account has been in surplus for 38 consecutive months, from the start of 2018. In January 2021, the surplus hit a record high of $9.6bn, then eased to $7.5bn in February and is forecast to narrow to $6.3bn in March on a flood of imports ahead of the Easter holiday period. Following this, the RBA board will announce the policy decision of its May Board meeting. The market view is that the RBA will maintain current policy settings. However, in recent times, the meetings which have been linked to the Statements on Monetary Policy have incorporated policy initiatives. Whilst the market expects that the announcement to extend YCC to the November 2024 bond will come at the August board meeting, this is the most likely initiative that could be brought forward to May.
New Zealand: Finance Minister Robertson gives a pre-Budget speech at 8:00am NZT. Overnight, the market expects whole milk powder prices to rise 1% at the upcoming GDT auction.
US: The March trade balance should reveal that the deficit widened to $74.3bn, with household and business demand driving a rise in imports. March factory orders should rise 1.3% - Q1 GDP pointing to strong but slowing business investment. Finally, the FOMC’s Daly will speak to the Economic Club of Minnesota.