AUD rally continues on the back of Fed minutes

Australian Dollar:

The Australian Dollar has maintained its early week advance and pushed higher still in the wake of positive domestic data and the US Federal Reserve’s release of its March meetings minutes. The AUD moved through 0.9350 as stronger than expected home loan approvals and an improved consumer sentiment report helped solidify recent gains. Analysts then seized on comments within the Fed’s minutes that suggested markets had overstated the pace and timing of rate rises and sent the Greenback lower across the board. The Aussie surged higher as traders absorb the Fed’s apparent shift in stance and touched an intraday high of 0.9398. Opening stronger this morning trading at 0.9387 focus is now directed toward today’s employment change and unemployment rate announcements as possible catalysts to push the AUD through 0.94.

• We expect a range today between 0.9330 - 0.9450

New Zealand Dollar:

A quiet domestic calendar meant the New Zealand Dollar remained relatively range bound throughout most of the day. Touching highs just above 0.8700 in early trade the Kiwi was then sold off in the lead up to the release of the US Federal Reserve’s March meeting minutes. The NZD shot higher as markets absorb the Fed’s deliberations and suggestions that previous expectations as to the pace and timing of interest rate hikes were misguided. The divergence in Monetary Policy amplified this week’s already bearish stance toward the USD and the Kiwi opens this morning stronger swapping hands at 0.8710. With little headline data available today the Kiwi will take its cues from offshore stimuli namely a Chinese Trade Balance report.

• We expect a range today between 0.8640 – 0.8740

Great British Pound:

The Great British Pound rallied during trade Wednesday as markets took advantage of favourable domestic data and a weakening USD. An Office for National Statistics report showed a narrowing trade deficit in January and helped push Sterling through one month highs touching 1.6765. Traders then seemed to square positions leading into the US Federal Reserve’s much anticipated release of FOMC meeting minutes and sent Sterling 30 points lower. Investors then pounced on signals within the March meeting minutes that suggested earlier forward guidance regarding a possible rate hike was misunderstood and the Pound surged upward to an intraday high of 1.6799. Opening higher this morning attention now turns to the Bank of England and its rate announcement for further direction.

• We expect a range today between 1.7830 – 1.7930

Majors:

The Greenback depreciation continued Wednesday as markets absorbed the Federal Reserve’s March meeting minutes. The Central bank appeared to play down recent forecasts suggesting interest rates may rise sooner than originally predicted and that previous comments may have been misconstrued. The minutes suggested the feds 6.5% unemployment rate as a marker to begin adjusting monetary policy was an outdated guideline and several committee members saw it as an inaccurate view of the slack still in the labour market. This shift in market monetary policy expectations could lead to a short term softening of the USD as investors look to higher yielding assets. The Euro Opens stronger this morning against is US counterpart buying 1.3855 while the USD/JPY remains in the middle of 24 hours ranges trading at 102. Focus now turns to unemployment claims today and Consumer sentiment and PPI numbers tomorrow for further direction with the analysts searching for strong readings to reverse the weekly bearish trend.

Data releases

• AUD: Unemployment Rate, Employment Change and MI Inflation Expectations
• NZD: Business Manufacturing Index, REINZ HPI
• JPY: Core Machinery Orders, Prelim Machine Orders and Bank Lending
• GBP: RICS House Price Balance, Asset Purchase Facility, Official Bank Rate, MPR Rate Statement
• EUR: French Industrial Production, French CPI, ECB Monthly Bulletin and Italian Industrial Production
• USD: Unemployment Claims, Import Prices, Federal Budget Balance and 30 year Bond Auction.