Curve Daily Commentary, April 29, 2015

AUD Soars to a Four Month High

The standout performance overnight came from the AUD which surged almost 2% to a four month high above 0.80. The move will see the debate over ‘will they or won’t they’ move rates next Tuesday intensify even further.

A little closer look at the move and it was predominately driven by the ongoing selloff in the USD. It wasn’t just the AUD that finished the session stronger with the EUR and CAD both firming with the and Pound even managing to finish the session higher despite missing expectation.

Screen Shot 2015-04-29 at 12.10.24 pm

While the rise back above 0.80 would be concern for the RBA, the fact that it is the USD weakness driving the move rather than domestic factors, there is little that they can do about it. They would still be looking to the FOMC to start to normalise interest rates over the coming month, however the continued weakness in the US data of late is throwing up more question markets of the timing of the first rate hike from the Fed.

The FOMC will be in focus tonight as they hand down their latest decision on monetary policy, which will occur at 4am local time. The market is not expecting any move at this meeting however there will be many looking for the Fed to position themselves to act in the upcoming meetings. Any sign of a dovish statement from the Fed could see the markets expectations for the first move be pushed out to 2016 which would not be good news for the RBA.