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JPY

07 May 2023

Risk sentiment recovers

• Improved sentiment. US regional bank share prices bounce back. Data also shows that the US labour market remains tight.• Fed rate expectations. Markets continue to forecast rate cuts by the US Fed from Q3 2023. We think this is misplaced. US CPI released this week.• AUD recovery. Positive risk appetite has supported the AUD. Consumer and business confidence, and the Federal Budget are the local focal points. After some tremors earlier in the week, risk sentiment improved on Friday. Following the sharp falls over previous sessions, US regional banking stocks rebounded strongly, with the banks in focus (PacWest Bancorp...

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04 May 2023

US banking issues & another ECB hike

• US banks. Regional bank issues remain in focus. This has dampened risk sentiment, and is supporting expectations the Fed tightening cycle is over.• ECB hike. ECB raised rates by another 25bps. Tweaks to its guidance were viewed ‘dovish’, but we think this is a misread. President Lagarde was quite ‘hawkish’ with more rate rises expected.• AUD holding. AUD ticked up, with a bounce in AUD/EUR supportive. US non-farm payrolls released tonight. Strong data could question the markets rate cut bets. The re-emerging US regional banking sector concerns remain in focus. The issues continue to dampen risk sentiment, though FX...

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03 May 2023

Conditional US Fed pause doesn’t mean pivot

• Fed in focus. US Fed hikes again, but adjusts guidance. Fed is now data dependent. That doesn’t mean hikes have ended or cuts are coming soon.• Negative risk sentiment. Pushing back of rate cut hopes saw risk sentiment turn negative. US yields lower. USD lost ground against the EUR and JPY.• AUD softer. AUD eased back, with AUD/EUR below pre RBA rate hike levels. ECB expected to hike again tonight. Pressure on AUD/EUR to continue. The US FOMC decision was in focus earlier this morning. As widely expected, the FOMC raised rates another 25bps, taking the target range to...

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03 May 2023

Hopes for Fed pause kick dollar lower

Equity futures are climbing, Treasury yields are coming down, and the dollar is pushing lower as investors position ahead of what many expect will become the Federal Reserve’s last rate hike in this tightening cycle. Risk appetite remains diminished after yesterday’s session brought a decline in job openings, a softening in durable goods orders, and evidence of worsening stress in the regional US banking sector – but expectations for more accommodative policy settings later this year are helping support narrowly-held gains across a number of asset classes.  Rowing against the overall dollar-negative tide, the Australian dollar is gradually giving back some...

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02 May 2023

Banking sector worries reemerge

• Risks reemerge. Renewed US banking sector concerns have weighed on risk sentiment. Bond yields, equities & oil prices fell overnight.• AUD volatility. AUD spiked after the ‘surprise’ RBA rate hike, but offshore developments have seen the AUD give back a lot of its gains.• US Fed in focus. Tomorrow’s US Fed meeting is the next major event. Another hike is expected. We think the Fed could push back on expectations rate cuts could start in H2. This could give the USD a boost. The relative calm across markets hasn’t lasted. Risk sentiment soured overnight as concerns about the US...

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