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USD

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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04 May 2023

Dollar weakens after Fed and ECB decisions match market expectations

The dollar is retreating for a third session, with all of its major counterparts recording gains on a Federal Reserve-driven drop in Treasury yields.  Oil prices are recovering after experiencing something resembling a flash crash around the Asia open last night, with prices plunging more than 7 percent. The move, which seemed to lack a fundamental trigger, saw closely-correlated currencies like the Canadian dollar and Norwegian krone remain relatively unmoved, but left the West Texas and Brent benchmarks down roughly 15 percent year to date. The market has been hammered by a weakening demand outlook even as the OPEC+ group of...

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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

Fed hikes, telegraphs imminent pause

The Federal Reserve’s rate-setting committee raised benchmark rates by a quarter percentage point this afternoon, and – somewhat surprisingly – explicitly put the conditions in place for inaction at upcoming decision dates. At the conclusion of its two-day meeting in Washington, the Federal Open Market Committee unanimously voted to raise the target range for the federal funds rate to 5.00-to-5.25 percent, with no dissents in favour of a smaller or larger move. The increase brings US rates back to levels last reached in August 2007. In the official statement setting out the decision, policymakers noted “Economic activity expanded at a...

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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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