Quick Recap
The Fed signalled clearly this morning, with the release of the Minutes to the last meeting, that they believe the US economy is stronger than the Q1 GDP print and that they are on track to tighten rates this year. They signalled however that June is unlikely to be the month they decide to move rates. They also recognised that when they do hike rate they will disrupt markets . The Minutes reveal a discussion by the FOMC on the potential for a jack in ‘term’ rates to cause a recurrence of the ‘taper tantrum’ we saw back in 2013 .
That means that the US dollar is going to stay bid. That’s the case with the initial relief of the Euro, and other, bulls which drove the US dollar lower. But’s bounced back now with the Euro still below 1.11 and the Aussie dollar below 79 cents.
Elsewhere, and this could impact the Aussie dollar medium term. Citibank reckons the price of iron ore is headed below $40 a tonne later this year and China has just made a stunning intervention into the iron ore market.
Gold is off a little, crude is trying to recover
On the day
On the day today there is nothing of note out in Australia although we do get consumer inflation expectations. Then its ‘flash’ manufacturing PMI’s for Japan, China, and Europe. retail sales are out in Germany, jobless claims in the US along with the Chicago Fed national activity index and existing home sales.
Here’s the overnight scoreboard (8.40am AEST):
- Dow Jones down 0.15% to 18,285
- Nasdaq flatish at 5,071
- S&P 500 down 0.09% to 2,125
- London (FTSE 100) up 0.17% to 7,007
- Frankfurt (DAX) flatish at 11,848
- Paris (CAC) up 0.31% to 5,133
- Tokyo (Nikkei) up 0.85% to 20,196
- Shanghai (composite) up 0.7% to 4,4488
- Hong Kong (Hang Seng) down 0.39% to 27,585
- ASX Futures Overnight (SPI June) +17 to 5,622 (that’s where it was yesterday)
- US 10 Year Bond -0.04% to 2.25%
- Australian 10 year bond -0.05% to 2.93%
- AUDUSD: 0.7874
- EURUSD: 1.1093
- USDJPY: 121.24
- GBPUSD: 1.5537
- USDCAD: 1.2205
- Crude: $58.76
- Gold: $1,209
- Dalian Iron Ore (September): 419
CHART OF THE DAY: ASX 200
Look at this support.
Solid as a rock – but if 5,555 gives way watch out.
Respect the level unless or until it does.
AUDUSD: The Aussie has broken support and could now head substantially lower. Could be another 100 points in this.
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Editors’ Picks
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GBP/USD declines toward 1.2500 on renewed USD strength
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Gold extends daily slide toward $2,300 as US yields edge higher
Gold stays under bearish pressure and declines toward $2,300 on Tuesday. The benchmark 10-year US Treasury bond yield stays in positive territory above 4.6% after US Employment Cost Index data, weighing on XAU/USD.
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Eurozone inflation stable as the outlook on prices gets increasingly muddied
Eurozone headline inflation remains stable at 2.4%. With higher energy prices and improving domestic demand, questions about the direction of inflation become louder.