Fed Offering Mixed Signals on Rate Hike Timing

AUD

The AUD was relatively mixed across the board, trading higher against the USD while dipping lower against the NZD pair. Asian Equities were mixed on Monday with the Nikkei down -0.4% while the Shanghai Comp managed to post a slight gain of 0.2%. The ASX close -0.1% lower as there was little economic or corporate news to drive momentum. Commodities closed higher with Gold, Iron ore and Silver all posting a gain. It’s another quieter day ahead with NAB Business Survey for October unlikely to move markets too much.  That said, the report should reveal an improvement in reported business conditions as lockdowns were starting to be lifted. Tomorrow's Chinese inflation data and then Thursday's local employment report the main local events for the week.

USD

The AUDUSD pair trades with a mild positive bias and consolidates back above the 0.74 mark, currently trading at a rate of 0.7425 at the time of writing. All three Major US Equities finished higher with the S&P 500 closing at a record high on Monday after congress approved an infrastructure spending package. US yields ticked higher with the 2-year gaining 3.5bps to 0.436% and oil advanced after OPEC resisted calls to boost supplies more quickly with WTI rising 1.3% to $82.29 a barrel. Fed’s Bullard on the wires saying that he expected 2 rate hikes in 2022 and noted that the Fed could take more action sooner if inflation remains persistent. In contract, Fed Vice-Chair Clarida meanwhile said that the benchmarks to raise rates could be met by the end of 2022 though also pointed out that the Fed was a long way from considering moving off from current near zero levels. It would seem there are significantly varied views amongst Fed members as to the timing of interest rate hikes. Little in the way of data today as traders focus on Thursday's Australian and US Job Data for the month of October.

EUR

The AUDEUR is sitting within similar levels seen to Monday with the pair trading at a rate of 0.6407 this morning. European Equities were subdued and closed with almost no movement with the CAC posting a slight gain of 0.1%. The only data of note out of the Eurozone came from the EZ Sentix investor confidence survey which improved to 18.3 in November. On Monday, ECB’s Lane, said that supply bottlenecks and higher energy prices are the main risks of inflation and economic recovery. And added that economic activity could outperform the central bank’s expectations only if consumer confidence increases. A lack of local data today with the European docket featuring the Zew Survey and some ECB members’ speeches. ECB's President Christine Lagarde and also Isabel Schnabel will cross the wires tonight.

GBP

The AUDGBP bucked the trend to trade slightly lower this morning with the pair trading at a rate of 0.5472 this morning. The FTSE 100 edged lower as gains in miners were offset by the weakness in consumer-fused stocks with the index ending 0.1% lower. In London, BoE’s Governor Bailey on the wires stated that the Bank of England will have to act if it sees expectations of higher inflation pushing up wages. Echoing his recent message about the direction of monetary policy which last week led to a jolt in financial markets. Bailey said there was a risk of more bottlenecks in the economy, especially in demand for labour which could fuel expectations of higher inflation. There is a lack of local data on the docket from the UK, however BoE Gov Bailey will be back at it again tonight, busy man.

NZD

The AUDNZD pair dipped lower on Monday to 5-week lows with the pair trading at a rate of 1.03493 this morning. Market commentators are citing positive New Zealand reopening news as supportive for the Kiwi. The government announced that the country’s largest city Auckland would have its Covid-19 alert level downgraded last week, allowing shops to reopen. Further reopening is expected at the end of the month. The country’s full vaccination rate is expected to hit 90% within a few weeks, a key threshold the government has said must be met in order for lockdowns to be eased. A prompt reopening after recent lockdowns will ensure this year’s economic progress isn't sunk. Looking ahead, in the absence of Kiwi data, Aussie employment figures on Thursday will be the next test between the Antipodeans.