FOREX: Antipodean Wrap - AUD & NZD Make New Gains
The AUD and NZD have both traded bid once more making new highs in Asia. In its minutes The Reserve Bank of Australia expressed caution over future interest-rate cuts, saying May would be an "opportune time" to revisit policy settings. The board will have additional data on the labor market, inflation, household spending, and global trade policies by the May 19-20 meeting, which would have a considerable bearing on the decision.
- AUD/USD - Asian range 0.6316 - 0.6355, AUD has traded quietly bid for most of the Asian session, breaking the overnight highs and going into the London open at the top of its range. Shorts will be hoping for sellers to return but will be watching the 0.6400 area this week for signs of the next leg of position squaring.
- AUD/JPY - Asian range 90.38 - 91.01, AUD/JPY was bid from the open and has drifted higher for the majority of the Asian session. Price goes into the London open around 91.00 pressing its highs. AUD/JPY is trying to build a base as risk stabilises, but it remains to be seen if it can this last. Expect supply once more back towards the pivotal 94.00 area.
- NZDUSD - Asian range 0.5861 - 0.5915, NZD has traded bid the whole session and there is still very little pullback. NZD printing around 0.591/5/20 going into London, having made new highs in the session.
- AUD/NZD - Asian range 1.0734 - 1.0779, the cross drifted lower in the Asian session before finding some buyers towards the 1.0740 area. The cross is going into London pretty directionless but the bias appears to remain for the upside to be capped, as liquidity in the NZD dries up quicker than for the AUD on any move higher.
Fig 1: AUD/USD Daily Chart
Source: MNI - Market News/BBG
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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
