AUD Bucks Recent Gains Following Hawkish Fed Rhetoric
AUD
The AUD suffered losses in the overnight session and dipped across most of the majors amid a hawkish FOMC rhetoric (see below) and risk-off trading conditions. Asian equities were largely mixed on Thursday, with the CSI losing out -1.8% while the Nikkei surged in the session, gaining 1.8%. Domestically, the ASX gained 0.3% - now at 8-month highs. A positive day of gains for commodities, with Gold and Silver gaining 0.6% and 0.9% respectively, Iron Ore being the star performer gaining 1.8%. There’s a flurry of macroeconomic data headed into the long weekend with Aussie Manufacturing & Services PMI’s to headline, followed by US Flash PMI data this evening.
USD
The AUDUSD pair struggles to hold onto April gains having hit the ceiling at 0.7457 before coming back down to trade at a rate of 0.7361 at the time of writing. A rise in US treasury yields saw US equities dip on Thursday with the Dow Jones losing out -1.0%, the S&P 500 -1.5%, and the NASDAQ dropping -2.1%. The 10-year Treasury yield advanced 4bp to 2.87% and crude rose 0.8% to $103.04 a barrel.
To the data, Fed Chair Jerome Powell hitting the wires in the NY session, signaling that 50 bps rate hikes at upcoming meetings were likely and the usually more dovish leaning FOMC member Mary Daly even mentioned the possibility of a 75-bps move. More importantly, Unemployment Claims coming in at 184k, slightly above expectations of 177k and Philly Fed Manufacturing Index coming in at 17.6 below expectations of 21.5. This evening the US docket will feature Manufacturing & Services data for April.
EUR
The AUDEUR pair dipped again and struggled to maintain the 0.68 handle, trickling down to a rate of 0.6795 this morning. In equities, both indices performed well with the DAX and CAC gaining 1.0% and 1.4% respectively. ECB President Christine Lagarde did not hint to much change in her remarks at the IMF Panel. However, a much more dovish member of the ECB Vice President Luis de Guindos hinted at the possibility of the first rate hike in July. His remarks seemed to endorse those recently made by some of the ECB’s more hawkish members in recent days pushing for a July hike and saw ECB tightening bets upped as a result. Following this, Eurozone Final CPI y/y came in at 7.4% slightly under expectations of 7.5%, and Final Core CPI y/y following suit, printing at 2.9%, slightly below estimates of 3.0%. It’s a busier EU docket this evening with the Eurozone PMI data being the key release.
GBP
The AUDGBP pair peaked to levels of 0.5703 in the late trade before tumbling back down to 3-day lows of 0.5646 this morning. The FTSE 100 finished the day only marginally lower than Wednesday’s levels, slipping a single point to 7,628 points down 0.01%. A lack of local domestic pound data had traders focus on hawkish ECB officials which amplified bets that the central bank would hike rates as early as July which in turn, effects the future monetary policy path of the BoE Also. The BoE last month softened its language on the need for more rate hikes while stressing downside risks to the economy. To the economic docket this evening, traders anticipate UK Retail Sales data for April with forecasts of -0.3%.
NZD
The AUDNZD pair was relatively sideways in trade after touching 20-month highs of 1.0998 on Thursday, before coming back down to trade at a rate of 1.0952 this morning. The AUDNZD pair was the most modest G10 performer as traders pulled back slightly after recent inflation data in the NZ. More importantly, the RBNZ has shown that it is actively keen to get the OCR (official cash rate) to neutral as quickly as possible with some analysts suggesting a 25bps hikes at the end of each five meetings from April to October, taking the OCR to 2.25%.