March FOMC minutes released this morning, stated the Federal Reserve will start unwinding its $4.5 trillion in bond holdings, purchased during quantitate easing, over the course of this year. This unwinding will essentially be the equivalent of a rate hike. An unwinding of the balance sheet could delay rate rises and therefore have a negative impact on US equities and the Dollar.
US equity markets, DOW (-0.20%), S&P500 (-0.31%), reversed earlier gains from a strong ADP employment change number, 263K Vs 184K expected, after U.S. House of Representatives Speaker Paul Ryan said tax reform will take longer to accomplish than repealing and replacing Obamacare would. He stated progress on healthcare legislation was closer than on tax policy.
The Yen advanced for a fifth consecutive day as the USD/JPY traded 110.394 during the session. The pair is approach the 110 handle which could be broken in the event of uncertainty around US trade talks with China. Fridays Non-Farm Payrolls are expected to be stronger however, so US Dollar selling could be short lived.
Gold strengthened on the close off the back of this news, traders looking for a breakout of its recent tight $6 range. Breakout traders eyeing resistance at the 1,260 level should US equity markets continue volatile down moves.
The Aussie consolidated overnight at the 0.757 level post RBA comments on Tuesday. Having failed to find support at the 0.760 level, a move to 0.750 is very real should US equity markets experience further losses.
Oil rejected the $55.00 level overnight, traders with sell orders at this level saw the commodity pull back to $54.05. Recent production output cuts have driven prices to 4-week highs.
Asian equity weakness expected on this open today. The ASX200 could test the 5,833 level during today’s trade, partly reversing last weeks’ end of month strength.
Trump and the Chinese President meet Thursday & Friday night (AEST) to discuss trade. Traders advised to keep an eye on markets for developing news.
