RBA Minutes Fail to Impress as the USD Rallies

The U.S Dollar was on the move this morning as focus continues to shift to tomorrow’s FOMC, with FED Chair Powell having raised the prospects of penciling in 4 rate hikes for the year. For the Pound, this morning’ inflation figures will be key, while ECB members also talk of a shift in policy in interest rates.

Earlier in the Day:

Economic data through the Asian session this morning was limited to New Zealand’s Westpac Consumer Sentiment figures for the 1^st quarter and Australia’s house price index figures for the 4^th quarter, while the RBA released the minutes from its monetary policy meeting of 6^th March.

For the Kiwi Dollar, the consumer sentiment index rose from 107.4 to 111.2 in the 1^st quarter, to sit just below a long-run average of 111.4.

• The expectations index increased by 4 points to 111.2, with the present conditions index rising by 3.5 points to 111.2
• The current financial situation index fell by 2.1 points to 0, which was the only blemish on the scorecard, with sentiment towards the economic outlook on the rise, as well as consumers’ expected financial situation and the good time to buy sub-indexes.

The weak 4^th quarter figures were attributed to New Zealand’s general election, with falling mortgage rates and rising house prices supporting consumer willingness to spend in the current quarter.

The Kiwi Dollar moved from $0.72425 to $0.72428 upon release of the figures, before sliding to $0.7217 at the time of writing, down 0.37% for the session.

For the Aussie Dollar, house prices rose by 1% in the 4^th quarter, which was far better than a forecasted 0.1% rise and 3^rd quarter 0.2% decline.

While the figures were positive, the moves in the Aussie Dollar were more attributed to the RBA minutes released at the same time.

There was nothing new in the minutes, with the RBA noting that the global economy continued to expand at a solid clip, supporting trade terms for the Australian economy that was on an improving trend, with labour market conditions tightening further. Expectations are for rising employment to support a pickup in wage growth as spare capacity falls through the year. The RBA also expects inflation to move to just above 2% by the end of the year, unchanged from the previous minutes.

Within the minutes, there was ultimately nothing dovish other than continued concern over household debt and weak wage growth, while there were no indications of a shift in policy near-term.

The Aussie Dollar moved from $0.77049 to $0.77145 upon release of the data and minutes before pulling back to $0.7701 at the time of writing, down 0.22% for the morning.

For the Japanese Yen, there was finally some respite, with the Yen down 0.21% to ¥106.32 against the U.S Dollar, with the Yen having given up gains from earlier in the day on Monday to end the day in the red by the close.

Concerns over the FOMC economic projections reflecting 4-rate hikes in tomorrow’s release is certainly something that’s got the markets jittery, though they’ve actually been jittery for much of the year, with Trump’s moves in the U.S another cause for concern.

In the equity markets, the Asian majors followed the U.S markets into the red this morning, with the Nikkei leading the way, down 0.61% at the time of writing, with the Hang Seng and CSI300 down 0.54% and 0.48% respectively, as the ASX200 ended the day down 0.39%.

Volatility is on the rise and it’s unlikely to get better anytime soon, with monetary policy and geo-political risk impacting risk appetite.

The Day Ahead:

For the EUR, economic data scheduled for release this morning is limited to February wholesale inflation figures and March ZEW economic sentiment figures out of Germany and the Eurozone.

Focus will likely be on the German ZEW Economic Sentiment figure, which is forecasted to be EUR negative, with the markets also mindful of what lies ahead at tomorrow’s FOMC meeting.

Later in the day, the Eurozone’s consumer confidence flash figure will be released that will provide further direction, though based on forecasts, is unlikely to have a material impact.

At the time of writing, the EUR was up 0.1% to $1.2336, with even the material narrowing in the Eurozone’s trade surplus unable to stop the EUR from retracing some of its recent losses, as members of the ECB make reference to a possible shift in focus towards current interest rate levels.

For the Pound, it’s a big day, with February’s inflation figures scheduled for release this morning.  As sentiment towards Brexit improves ahead of Friday’s Euro Summit, today’s inflation figures will certainly provide some further direction for the BoE on monetary policy, as the monetary policy committee meet this week and release their policy decision on Thursday.

Better than forecasted numbers would certainly give the Pound a boost, with $1.41 – $1.42 levels not unreasonable, particularly if Brexit chatter remains positive.

At the time of writing, the Pound was down 0.01% to $1.4023, as focus shifts to today’s inflation figures that are expected to be softer.

Across the Pond, there are no material stats out of the U.S, leaving the markets to consider the Redbook, tomorrow’ FOMC meeting and activity in the White House through the day.

The Dollar Spot Index was up 0.20% to 89.943 at the time of writing, with Jerome Powell’s talk of 4-rate hikes for the year driving the Dollar through the Asian session.

Across the border, the Loonie is back in action, with January wholesale sales scheduled for release. While the numbers are forecasted to be Loonie positive, concerns over the future of NAFTA remain a bugbear, with any major upward moves likely to be on hold over the near-term.

At the time of writing, the Loonie was down 0.05% to C$1.3085 against the U.S Dollar.

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