Federal Reserve meeting minutes suggested a rate hike would be coming “fairly soon” in minutes released 6:00AM EADT. Concern over this ambiguous timeframe saw the US Dollar Index fall to Tuesdays 10,110 level, boosting major pairs including the AUD/USD which surged through the 0.7700 level. Both the Euro and Pound bounced off the data, providing some support to the GBP/USD pair after last night’s weak internals in the UKs GDP.
The Fed still eyeing employment and inflation, should they continue to improve (keep in mind the 12-month CPI to January increased 2.5%, the biggest one year gain since March 2012) this will dictate the timing of rate hikes.
Small losses of ~0.10% in the S&P500 and Nasdaq overnight – big players still content to be long US equity indices. Oil was down 1.5% during last night’s session, Gold relatively unchanged on the session with a tight range of 1,241.5 – 1,232.1.
The EUR/USD traded at six week lows overnight over concerns of the growing support for far-right candidate Marine Le Pen (anti-immigration and ‘Frexit’ supporter). In late trading losses were reversed as it was revealed popular French centrist Francios Bayrou would stand by the Independent Emmanuel Macron – boosting the candidates chances of defeating Le Pen in May’s final round of voting.
Consensus to be long the Aussie is growing, with Deutsche Bank this week releasing a target through 80cents, strengthening commodity prices and the potential the RBA no longer has rate cuts in its sights. A difficult position to take, given the AUD/USD rally this year and the potential for commodities to take a breather.
Interestingly, the last time Iron traded these levels in July 2014, the AUD/USD was hovering around the 0.92c, Aussie interest rates were at 2.5%, CPI was 3% and US rates were near zero.
Today sees Australia’s Private CAPEX q/q released at 11:30.
