FOREX: Antipodean Wrap - AUD & NZD Holding Onto Gains
The AUD and NZD have both held onto their respective gains from last week in tight Asian ranges. Broad USD weakness last week has seen an overhang of AUD and NZD shorts being pared back.
- AUD/USD - Asian range 0.6278 - 0.6314, AUD has traded sideways for the whole Asian session, albeit near the highs of last week. Shorts will be hoping for sellers to return but will be watching the 0.6400 area this week for signs of breaking to signal the next leg of position squaring.
- AUD/JPY - Asian range 89.57 - 90.81, AUD/JPY fell away early in the session moving down to the 89.60 area before buyers reemerged. Price goes into the London open around 90.00. AUD/JPY is trying to build a base as risk stabilises, but it remains to be seen if this will last. Expect supply once more back towards the pivotal 94.00 area.
- NZDUSD - Asian range 0.5819 - 0.5860, NZD has traded sideways the whole session but there is still no dip. NZD printing around 0.5850 going into London, the market is short and the price action poor. Watch a close above the 0.5850 area for the next potential level to trigger short covering.
- AUD/NZD - Asian range 1.0754 - 1.0830, the cross drifted lower in the Asian session before finding some buyers towards the 1.0760 area. The cross is going into London pretty directionless but the risk still feels that bounces will be capped as liquidity in the NZD dries up quicker than for the AUD on any move higher.
Fig 1: NZD Spot
Source: MNI - Market News/Bloomberg Antipodean Wrap - AUD & NZD Holding Onto Gains
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FED: March Economic Projections: Higher Inflation, Weaker Growth, Same Rates
The MNI Markets Team’s expectations for the updated Economic Projections in the March SEP are below.
- The unemployment rate is likely to rise slightly for 2025 alongside a downgrade in GDP growth, while the 2025 core and headline PCE inflation projections are set to rise again. Changes to later years will likely be limited, however.
- More detail on the shift in Fed funds rate medians is in our meeting preview - we will add more color next week.
FED: Market Pricing Nearly 3 2025 Cuts As Conditions Tighten
Amid rising government policy uncertainty, sentiment among businesses and consumers has fallen sharply since the start of the year, while equities and the dollar have reversed their post-election rise. Overall, financial conditions have tightened, even if stress is not yet mounting, e.g. no major widening of credit spreads (the accompanying chart shows the Fed’s financial conditions impulse index but only through January).
- Combined with growth fears, this has affected expectations for the Fed’s rate path, with around 18bp more cuts expected in 2025 compared with what was seen after the January FOMC. 65bp of cuts are priced for the year as a whole. 2025 cut pricing reached 71bp before the February inflation data and 76bp before the February payrolls report.
- A rate cut is seen with near zero probability for March’s meeting, but the first full cut is just about priced for June, with a second nearly priced by September.
- Chair Powell has no reason to endorse or refute these expectations – he’s likely to be happy with a press conference that ends with little discernable change in pricing.
CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
- CANADA'S CARNEY ANNOUNCES ELIMINATION OF THE CONSUMER CARBON TAX
