The Australian Dollar faced significant pull-back overnight hitting a high of 0.7592 before retracing to the 0.7504 level. The AUD has shown strong upward momentum in recent weeks as commodity prices strengthened and investors looked for yield in a NIR environment. Overnight weakness in the Australian dollar can be in part attributed to softening commodity prices in particular gold and oil.
Oil prices fall as Iran ramps-up production levels. Oil prices have fallen nearly 3% overnight as Iran’s Oil minister Bijan Zanganeh confirms Iran will only join production freeze discussions after its production reaches four million bpd. With the current supply in the global oil sector combined with depressed prices, expectations of production limiting actions and price support from OPEC are rising. Despite these expectations, OPEC production has remained in over-supply. Both WTI Oil and Brent have fallen from their weekly highs of $39/bbl and $41.45/bbl to now hovering at the $37.40/bbl and $39.68/bbl levels at time of writing.
Significant central bank meetings are on this week.
BOJ will meet today in the afternnon, with no expectations to carry out similar actions to January rate cuts. However, risk remains as the current strength of the Yen may call for further actions to be taken.
FOMC is scheduled on Thursday. The market is putting bet on strengthening in the USD as markets ready themselves for a more positive Fed announcement this week. Probability of a March hike is around 6% however expectations are for Yellen to maintain the possibility of rate hikes in upcoming months if data is supportive of said move.
As USD rallied during the day, gold price fell to lowest $1229 overnight and bounced back to the level of $1234.
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