Market Wrap: US dollar index is around 0.2% lower after FOMC - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: Europe led markets overnight, sparked by developments in the French election campaign. Viewed as weakening populist Le Pen’s chances, the news caused a rebound in the EUR and interest rates. The FOMC minutes just released caused a dovish reaction.

Interest rates: US 10yr treasury yields initially fell from 2.45% to 2.39% but completely retraced during the NY session, mimicking the moves seen in German bund yields. The FOMC minutes caused another reversal, the 10yr at 2.41% as we write. The 10yr bund yield fell from 0.33% to 0.24% before rebounding on the French news, while 2yr yields initially made an all-time low of -0.92% before rebounding.

US Fed fund futures implied rates are slightly lower, the April contract at 0.71%, implying around a 35% chance of a rate hike in March. FOMC member Powell said March is on the table, while the FOMC minutes said a rate hike would be appropriate “fairly soon”.

Currencies: The US dollar index is around 0.2% lower. EUR initially fell to 1.0494 – a six-week low – before rebounding on the French news and then the FOMC to 1.0572. USD/JPY ranged between 112.90 and 113.65. AUD pushed higher to 0.7715, the NZD to 0.7190. AUD/NZD ground higher to 1.0749 – a four-month high."