US Raises Interest Rates Overnight, Europe's Turn Tonight

AUD

The Aussie Dollar has failed to consolidate recent short-lived strength, opening this morning lower against the major currency pairs as volatility continues with different central banks in action this week around the world. Asian equities were mixed on close yesterday with ASX -1%, Shanghai Comp +1.1% and Nikkei +0.1%. Commodities also saw a mixed performance with Crude Oil -4.7%, Natural Gas -2.1%, Gold +0.3%, Silver +0.4% and Iron Ore -0.8%. Yesterday was a fairly quiet day for local data with only the Retail Sales m/m which beat expectations of a 0.2% at 0.4%. Looking to the day ahead markets expect to see little movement in both the Aussie Trade Balance and Chinese Caixin Manufacturing PMI.

USD

After a seesaw night for the AUDUSD which saw brief highs above the 67 handle, the pair opens lower this morning at 0.6648 as the effects of the US interest rate decision permeated markets. Wall street closed lower with Dow Jones -0.8%, S&P500 -0.7% and NASDAQ -0.5%. US ADP Employment for April printed at 296k, up from 142k and well above expectations of 150k. ISM Services PMI came in slightly above expectations of 51.8 at 51.9 and Crude Oil Inventories read better than expectations of -0.5M at -1.3M. In what was the main event, the FOMC delivered the expected 25bps hike earlier this morning although did hint that a possible pause in the rate hike cycle is on the cards. Following this release, FOMC Chair Powell began his press conference by acknowledging the strength of the US banking system and the improvements made since March in response to the recent turmoil in the regional banking sector. He then reiterated the tone of the statement though was perhaps a little more forceful on inflation with the USD recovering losses. In the Q&A section, he stressed that a pause had not been discussed and later noted that it would be inappropriate to cut rates as the outlook for inflation did not support it. The USD strengthened in the aftermath of these comments. A quieter night on the cards in America tonight with the major data pieces to look out for include Challenger Job Cuts y/y and Unemployment Claims.  

EUR

Risk sentiment forces the AUDEUR pair downhill, opening this morning close to half a cent lower at 0.6004 and a full cent lower than the post RBA highs from Tuesday afternoon. European equities were higher on close with DAX and CAC gaining 0.6% and 0.3% respectively. A fairly uneventful night in euro data, only seeing the release of some low tier data including French Gov Budget Balance which was lower than previous readings. We also had Italian Monthly Unemployment Rate and Unemployment Rate for the Eurozone which both beat market expectations. Tonight, we will see multiple data releases with the main standout being the interest rate decision for the Eurozone, the ECB is expected to once again raise rates by a further 25 basis points as despite the the fall in energy prices, inflation remains high across a broad range of goods and services. Core inflation is only showing tentative signs of peaking around its current level of 5.7% y/y and it remains unclear how fast the disinflation process will be. There's an outside chance of a 50bps rate hike here from the ECB which would no doubt lead to further EUR strength.

GBP

The AUDGBP sees a further drop overnight, surrendering the 0.53 handle again this morning, opening at 0.5285. British Equities saw slight gains with the FTSE gaining 0.2% on close. No data out yesterday, and tonight we will see some mid-tier data in the form of Final Services PMI, M4 Money Supply m/m, Mortgage Approvals and Net Lending to Individuals m/m.

NZD

The AUDNZD pairs sees a only slight drop after some mixed data releases yesterday, opening this morning at 1.0697. A data-heavy day for NZ standards yesterday, with standout pieces including Employment Change q/q and Unemployment Rate both beating market expectations and the  Labor Cost Index q/q seeing a slight miss. Governor Orr also hit the wires claiming New Zealand’s financial system is well placed to handle the higher interest rate environment and international financial disruptions, hinting at further interest rate hikes for the Kiwis and leading to NZD strength. Looking to today we saw Building Consents m/m come in at 7% verses a previous reading of -9.7% and we await the release of ANZ Commodity Prices m/m.