Overnight, AUD plunged against all of its peers after Q4 Australian Capex data (Q/Q -2.2% vs. Exp. -1.6% (Prev. 0.2%) saw a 2nd consecutive decline. This prompted markets to push ahead expectations for a 25bps RBA rate cut next week, with odds now at 53% vs. 38% before today's data. AUD/USD broke below medium-term support at 0.7850 with the move exacerbated by aggressive selling by a US investment bank around 0.7870. Thereafter, AUD/USD initially strengthened during the European morning due to the strength seen in the metal complex, however the pair was finally rejected at the resistance level of 0.7900 as the USD gained momentum as AUD/USD erased all of its earlier gains in a 100 pips swing.
USD-index strengthened as Fed's Bullard downplayed the impact of a stronger currency on the US economy and the Fed's monetary policy. The afternoon saw a slew of US data releases with positive US core CPI and Durable Goods (Jan) M/M 2.8% vs. Exp. 1.6% which lifted the USD-index to trade at its highest levels of the week. Furthermore, this subsequently saw EUR/USD to break beneath 1.1300 and trade lower by over a point which was further exacerbated after sources reported US Tech funds selling the EUR which also weighed on EUR/GBP as the cross traded at lowest levels since Dec. 2007. Alongside the bid in the USD, a slide in T-notes bolstered yields which supported USD/JPY to trade above the psychological level of 119.00. Elsewhere, the encouraging Canadian CPI reading (Jan) Y/Y 1.0% vs. Exp. 0.8% briefly halted USD/CAD’s upside, however the weakness in WTI and stronger USD overshadowed the positive data as the pair trade tested the 1.25 handle.
Looking ahead, the data slate provides a raft of Japanese data releases tonight with CPI, Jobless rate and Retail Sales along with BoE’s Shafik, Fed’s Lockhart, Fed’s Fisher and ECB’s Linde due to speak.
USD-index strengthened as Fed's Bullard downplayed the impact of a stronger currency on the US economy and the Fed's monetary policy. The afternoon saw a slew of US data releases with positive US core CPI and Durable Goods (Jan) M/M 2.8% vs. Exp. 1.6% which lifted the USD-index to trade at its highest levels of the week. Furthermore, this subsequently saw EUR/USD to break beneath 1.1300 and trade lower by over a point which was further exacerbated after sources reported US Tech funds selling the EUR which also weighed on EUR/GBP as the cross traded at lowest levels since Dec. 2007. Alongside the bid in the USD, a slide in T-notes bolstered yields which supported USD/JPY to trade above the psychological level of 119.00. Elsewhere, the encouraging Canadian CPI reading (Jan) Y/Y 1.0% vs. Exp. 0.8% briefly halted USD/CAD’s upside, however the weakness in WTI and stronger USD overshadowed the positive data as the pair trade tested the 1.25 handle.
Looking ahead, the data slate provides a raft of Japanese data releases tonight with CPI, Jobless rate and Retail Sales along with BoE’s Shafik, Fed’s Lockhart, Fed’s Fisher and ECB’s Linde due to speak.
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