The USD continues to show signs of recovery after its post-FOMC sell-off and is stronger across the board.
There was little economic news to drive markets. The only release of note was US new home sales, which were in line with expectations.
With nothing much going on a series of Fed speakers have got more attention than they deserve.
We’ve had Lockhart, Williams, Harker, Evans and Bullard all on the speaking circuit and the message has been consistent – a more hawkish tone than market pricing, the FOMC statement and Yellen’s press conference.
Bullard gave an interview this morning and said that a rate hike should be considered next month following another strong jobs report. This was the same guy who didn’t vote for a rate hike only last week. A wise old sage once told me to ignore what any Fed speaker said apart from Yellen, Dudley or Fischer and that advice remains pertinent today.
Nevertheless, the “noise” from these speakers is having an impact on the USD, which is showing a broadly-based 0.6% rise on the DXY index.
The AUD is the weakest performer, down 1.1% to 0.7540. This reflects a broadly-based sell-off of commodities on the back of USD strength.
Oil prices have received added downward pressure from a US report showing crude oil inventories at their highest level in eight decades. WTI crude is flirting with the $40 per barrel mark after almost hitting $42 yesterday. Gold and copper prices are down in the order of 2% and Dalian iron ore futures are down 5%.
The NZD is down by 0.5% to 0.6720, having traded as low as 0.6685 this morning. This puts the NZD back down close to the middle of its trading range since early February. NZD/AUD is back up above the 0.89 mark, after falling to as low as 0.8823 late yesterday. Some profit-taking on long AUD positions is likely a factor in addition to the commodity sell-off.
GBP continues its downward track on Brexit risks and is trading around 1.41. EUR is back below the 1.12 handle. USD/JPY is up 0.2% to 112.55.
The BoJ’s Funo was on the wires arguing that the next easing might not be a rate cut. Other options were available. He noted that the foreign exchange market worked as one of the transmission channels of monetary policy and the implication was that further quantitative easing policy was on the table.
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