USD Firms Leading in to Tonight's Fed Meeting

AUD

The AUD lost some ground overnight, being pushed on the back foot against most major currency pairs, with the NZD being the only exemption.  US Equities retreated from record highs overnight, while US 10 Year Bond Yields remained steady, as a result the AUD also saw some downside movement. Commodities also struggled overnight, with Copper and Iron Ore losing -4.1% and -0.8% respectively. As we know, the AUD likes high commodity prices and US equity prices so no doubt the AUD was under pressure.  The VIX, which is an index that measures the level of risk and fear within the market, rose 3.8% over night as we draw closer to tonight's all-important US Fed meeting. The AUD commonly thrives in a market with positive risk sentiment, as such the heightened risk environment could have also hurt the AUD. It looks to be a busy day today with a raft of Chinese data due at 5pm, including Yearly Industrial Production and Unemployment data. However, investor eyes are keenly anticipating tonight's US Fed meeting, which is also followed tomorrow by Australian Unemployment Data which our own reserve bank will be keenly watching.

USD

The AUD/USD lost some significant ground overnight, currently trading at a rate of 0.7685 at time of writing. US Equities had a weaker performance during the overnight session, with the S&P500 and NASDAQ losing -0.2% and -0.7% respectively. Due to the AUD’s recent high correlation with US stocks, this may have also weakened the AUD. US Monthly retail sales came in worse than expected at -1.3% (vs exp -0.6%), while Monthly PPI beat analysts’ expectations at 0.8% (vs exp 0.5%). The USD seemed to gain more from the positive PPI data, as it pushed AUD further south. Markets are in waiting for tonight's FOMC statement, Federal Funds rate and Press Conference; any signal that the Fed Reserve is beginning to consider tapering could drastically move markets. The Dot Plotter for US Bond Yields is likely to present a message that at a rate hike should happen before the end of 2023, as currently only 3 out 11 dots favor a ‘no hike’ decision. Tonight's meeting also includes a quarterly economic projection in which the dots will reflect any changes since last quarter. With the potential for increased volatility with the aforementioned events, markets orders should be a consideration and can be a good way to capture overnight peaks/troughs. 

EUR

The AUD/EUR also lost some ground overnight, currently trading in at a rate of 0.6336 at time of writing. For the first time in history the Greek 5 Year bond yields went negative, these bonds were yielding around 20% 10 years ago. Which is a major turnaround for a country that not too long ago needed the largest financial bailout in history. No Significant data on the books today, with just some Final Yearly CPI data scheduled for release tomorrow night. All eyes on the Fed tonight.

GBP

The AUD/GBP also trading lower than yesterday’s levels, currently trading at a rate of 0.5454 at time of writing.  The UK April Unemployment Rate dipped from 4.7% to 4.6% as expected, while it was also announced that the UK-Australia trade deal has been agreed upon. Meat will be able to be shipped to the UK tax-free every year and tariffs will be removed on almost all other Australian products. The increase in trade will most likely affect the AUD/GBP, depending on the change in demand for both currencies. A relatively busy day today for the GBP, with UK Yearly CPI and Monthly PPI data looking to be released today

NZD

The AUD/NZD being one of the only currency pairs trading flat this morning against yesterday’s levels, current trading in at a rate of 1.0793 at time of writing. Thursday looks to be a pretty packed day with New Zealand Quarterly GDP also scheduled to be released. With the NZD usually being quite on data front, any results that differ from expectations could cause some significant market movement.