Fed Minutes Confirm Looser Monetary Policy Approaching
AUD
The AUD was rather flat across the overnight session, trading slightly lower or higher than yesterday’s levels across most major currency pairs. The ASX outperformed most Asian indices gaining 0.9%, however this didn’t seem to support the AUD in any way. US equities had an uneventful session trading fairly flat, reflecting the AUD’s movement. Commodities had a mixed overnight session with Iron Ore falling -0.6% and Copper rising 1.3%, also possibly contributing to the AUD’s rather stagnant movement. US Yields continued to fall yesterday by -0.29% to 1.32%, showing an increase in investor risk aversion. The AUD commonly thrives in a market with positive risk sentiment, as such the movement could show some further pressure on the AUD. The AUST 10 Year Bond Yield fell nearly -0.8%, bringing the two countries’ Bond Yields to 1.32% and 1.39% respectively. This has narrowed the interest rate differential, and hence further decreasing the enticement of the AUD. Markets eyes are turned to RBA’s Governor Lowe, who is scheduled to speak again today about Australia’s Labor Market and Monetary Policy. Due to the recent emphasis on central bank’s QE Policies, investors will be watching to gauge any indications of changes in the RBA’s future policy plan.
USD
The AUD/USD trading fairly flat with yesterday’s levels, currently trading at a rate of 0.7486 at time of writing. US Equities were rather flat with the S&P500 and NASDAQ moving 0.3% and 0.0% respectively. Due to the AUD’s recent high correlation with US stocks, this could also explain the lack of movement from the AUD. The FOMC Minutes released last night essentially confirm that the FED is edging ever closer to tapering asset purchases and adjusting their wider monetary policy stance. Investors believe that the FED will most likely begin tapering before the ECB. As the divergence in monetary policies and interest rates continues to widen, pressures on currency markets will also continue to diverge. If the RBA remains to be one of the last central banks to address their tapering policy, the AUD will feel the pain. US Unemployment Claims are scheduled to be released later tonight.
EUR
The AUD/EUR is traveling at slightly higher levels than yesterday, currently coming in at a rate of 0.6346 at time of writing. Monthly Italian retail sales came in massively under expectations at 0.2% (vs exp 3.0%). However, this did not seem to aid the AUD as EU officials revised their expectations for the Euro-area economy 2021 growth forecast from 4.3% to 4.8%. Europe’s improving health situation and virus containment is putting Europe in better position to speed up their post covid recovery. If Australia continues to move backwards in its fight against Covid, the AUD could suffer the consequences. A quiet day ahead in terms of data, with the ECB’s President Lagarde Speaking tomorrow night.
GBP
The AUD/GBP also trading fairly flat, current sitting at a rate of 0.5423 at time of writing. The UK is still scheduled to open up its economy despite increasing Covid Cases, as Jabs are being used to replace restrictions. As the Australian and UK Covid-policies have begun to differ so broadly, investors and the public will be watching to see which policy yields the best results both from a health and an economic perspective. BoE’s Governor Bailey is scheduled to speak tomorrow night after the release of UK’s Monthly GDP statistics.
NZD
The AUD/NZD has moved slightly down from yesterday’s levels, currently trading at a rate of 1.0669 at time of writing. AUD has been on the back foot here for the last 5 weeks or so, having slowly leaked about 1.2% worth of it's value. No significant data scheduled for the end of the week.