Markets conclude Fed in no hurry to hike; JPY pushes higher ahead of BoJ meeting; AUD & NZD both push higher after early dips

By Kymberly Martin

Most currencies have traded reasonably contained ranges after their initial post US FOMC moves. Having traded as high as 0.7120 overnight, the NZD/USD now sits close to 0.7070.

Yesterday morning’s post US FOMC spike higher in the USD index prove ephemeral. The market appears to have quickly concluded that although the Fed highlighted reduction to global and domestic risks, it was not badgering for an imminent rate hike.

The market still prices less than a 60% chance of one 25bp FFR hike by year-end. The USD index quickly declined from 97.50, to below 96.80. It traded a bit lower intra-night but has now returned to the latter level.

After a bit of volatility earlier yesterday, the JPY has consolidated overnight around the 104.80 level. Early this morning the USD/JPY has pushed back up to 105.50 as the market awaits the Bank of Japan’s announcement today.

After Japan’s Prime Minister Abe announced details of a fiscal stimulus package earlier in the week the market now looks for complementary monetary policy easing today.

The GBP/USD has drifted lower overnight. From 1.3220, it now trades at 1.3140. Since its post-‘Brexit’ plunge the GBP/USD has traded a range between 1.2800 and 1.3500. We continue to expect the lower-end of this range to be broken as the year progresses.

The NZD/USD and AUD/USD both suffered a very brief blow following the release of yesterday morning’s US FOMC statement. However, within an hour they were back above their previous levels and pushed higher over the course of the afternoon. Both made late evening highs before drifting a bit lower in the early hours of this morning.

This was likely assisted by a softer tone in global commodity prices overnight, including a 1.5% decline in the WTI oil price. It now trades at its lowest level since early-April.  This morning the AUD/USD and NZD/USD trade at 0.7500 and 0.7070 respectively.

There is a slew of domestic and global data due before weekend. Most important of the domestic releases will be the ANZ business survey, due this afternoon.

Tonight’s focus will likely be on advanced readings of Eurozone and US Q2 GDP

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Daily exchange rates

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