FED Remains Tight Lipped with Tapering Details

AUD

It was a subdued overnight session that saw the AUD trading at similar levels despite the FOMC Press Conference early this morning (see below). Australian Q2 CPI data from yesterday morning garnered little attention as firm expectations were met, as CPI q/q reached 0.8% against 0.7% forecasted, and Trimmed Mean CPI q/q reached 0.5% on track with the forecasted 0.5%. This result does indeed show that inflation is not a lost hope for the local economy, but we must remember that the RBA maintains the view that this bounce back may be transitory. Close attention was paid to Hong Kong and Chinese Equity Markets on Wednesday with the Hang Seng index managing to make positive gains of +1.5% with the Shanghai composite losing only -0.6%. Iron Ore continues its north-bound trajectory trading just off record highs to gain +1.0%, Gold gaining +0.4%, and Copper took a breather to lose out -1.5%. All of these results were pro-AUD which is reflected in the AUD holding its value in the last 24hrs despite the economic damage being inflicted by the current lockdown settings. Only low-tier data on the calendar today, Australian Import and Export Price Index data for the second quarter (Q2) will be released this morning.

USD

The AUDUSD was sitting below levels seen yesterday morning before seesawing back up to sit marginally higher, trading at 0.7375 this morning. What caused the jump was some cautious sentiment from the US Federal Open Market Committee (FOMC), with the early morning meeting revealing there would be no monetary policy change as widely expected, despite mentioning, “continuing economic improvement,” during the July meeting. The US central bank Chairman Jerome Powell resisted the urge to mention specific tapering details despite saying, "Economy has made progress toward goals since setting the bar for taper in December and will continue to assess progress in coming meetings." The US Dollar Index (DXY) dropped to a 12-day low following the Fed outcome, printing a three-day fall, which in turn favoured the AUD. Moving forward, Advance readings of US Q2 GDP printing later tonight should be eyed for fresh impulse.

EUR

The AUDEUR was trading within tight ranges to trade a 0.6226 this morning. German consumer confidence came in at -0.3% holding steady heading into August, however missing expectations of 1%. In France, consumer confidence worsened slightly in July, falling from 103 points in June to 101 points in July. Finally, Italian business and consumer confidence improved in July coming in at 115.7 and 116.6 respectively, both beating expectations. Meanwhile European Equities managed to hold positive with the CAC taking +1.2% gains, and the DAX and FTSE both taking +0.3%. Tomorrow it will be quite a data dump with some Flash and Preliminary CPI and GDP data coming out of Germany Italy and the Eurozone.

GBP

The AUDGBP trading at almost identical levels seen to yesterday morning to sit at 0.5304 this morning. The Pound has been one of the strongest performing currencies and this is likely off the back of confidence in the UK economy and Downing Street’s apparent optimism about easing Covid-19 restrictions. The current levels we are seeing at the moment puts the AUD at the lowest levels since May 2020, peak pandemic era. Despite the confidence in the vaccine rollout and ‘Freedom Day’ last week for the Britts, the UK Government posted a rise in daily cases for the first time in 8 days, with growing deaths and hospitalisation rates even as testing levels decrease in the UK. It’s a quiet week ahead with attention turning to the BoE Monetary Policy meetings on Wednesday next week to see if there will be any hawkish response to economic recovery as the BoE weighs up the timing of tightening monetary policy.

NZD

The AUDNZD pushed marginally higher to trade at 1.0599 at time of writing. There’s little notable data of note recently out of cross-Tasman siblings, this morning the ANZ business confidence out of New Zealand may spur some event risk but would take a wild outcome to move currency markets dramatically. Risk sentiment through the region will give be the key looking forward.