No imminent rate hikes evident from FOMC statement; AUD has burst of activity following CPI release; Yen spiked on stimulus package announcement

By Kymberly Martin

Ahead of the US FOMC meeting most currencies were relatively contained.

However, the JPY weakened and the AUD has had a volatile 24-hours. Post the meeting, the USD index has pushed a bit higher but we would be surprised to see it extend too far.

Overall the US FOMC statement was a little less dovish than its last, but did not point directly to imminent further hikes.

The AUD/USD experienced a burst of volatility yesterday afternoon, following the release of AU Q2 CPI. It initially surged higher on the stronger-than-expected core CPI number. However, the market soon reassessed. The AUD/USD broke back through 0.7500 and now trades at 0.7460.

The JPY was the other currency making big moves yesterday. It initially fell quite sharply as Japan’s Prime Minister, Abe, announced the much-awaited fiscal stimulus package, totally ¥27t. However, detail was still quite sparse. The market is now speculating whether this will be complemented by announcement of further monetary stimulus from the Bank of Japan, tomorrow. The USD/JPY briefly surged from 105.30 to above 106.50. However, it later calmed down and consolidated around 105.70 ahead of the US FOMC meeting. It remains around that level, post meeting.

The NZD/USD experienced limited contagion from the gyrations in the AUD yesterday. Overnight, ahead of the US FOMC meeting it consolidated around 0.7040. After a brief post-meeting dip it has returned to the same level.

The NZD/AUD experienced some volatility around the release of AU CPI yesterday afternoon. It gapped lower on the release, but soon found its feet. From below 0.9340 it has subsequently battled its way back up to 0.9440.

There is no data scheduled on the domestic calendar today. There is a smattering of data releases expected offshore tonight. However, after this morning’s US FOMC statement provided little drama, in the absence of any other surprises we may see reasonably contained trading.

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Daily exchange rates

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