Talking Points:
- Aussie Dollar follows ASX 200 lower as FOMC sinks metals, mining shares
- Canadian Dollar continues to sink as crude oil prices drop to six-month low
- US Dollar vulnerable even after upbeat Fed dulled payrolls data event risk
The Australian Dollar underperformed in Asian trade. The currency fell alongside its home country’s benchmark ASX 200 stock index, pointing to risk aversion as the impetus behind the selloff. Metals and mining firms led the move lower after a hawkish FOMC policy statement sank prices for their wares.
The Canadian Dollar likewise declined, extending a down move that brought it to the lowest level in over 14 months against its US counterpart. The drop tracked plunging crude oil prices, which sank to a six-month low in Asia after suffering the largest daily loss since early March in the prior session.
The New Zealand Dollar traded higher however after an RBNZ survey of inflation expectations showed respondents’ two-year price growth bets jumped to 2.17 percent, the highest since the third quarter of 2014. The currency rose alongside front-end bond yields, pointing to a hawkish shift in the policy outlook.
From here, a lackluster offering of European economic data is likely to see currency markets looking ahead to April’s US employment figures for direction. Analysts expect to see that 190k jobs were added last month, a pickup-up from the paltry 98k increase recorded in March.
The FOMC’s sanguine attitude about the first-quarter slowdown in US economic growth suggests that only a truly abysmal disappointment will sour June rate hike speculation. Fed Funds futures now price in the probability of an increase at a whopping 93.8 percent.
On balance, this seems to limit downside potential for the US Dollar. This is hardly a one-way bet however. As noted previously, the Fed’s sunny disposition despite gloomy data flow may rob the release of its usual market-moving potential, leaving the greenback at the mercy of other forces.
Indeed, yesterday’s session was a prime example of such a scenario. The FOMC announcement continued to reverberate but the US unit weakened all the same. A EUR/USD surge echoed as broader Dollar weakness after polls showed Emmanuel Macron won the final debate before France’s runoff election.
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Asia Session
European Session
** All times listed in GMT. See the full DailyFX economic calendar here.
--- Written by Ilya Spivak, Currency Strategist for DailyFX.com
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