AUDUSD: Markets in disarray as Fed meeting starts
The Federal Reserve kicks off a two-day policy meeting against an increasingly disorderly market backdrop.
Market consensus has rapidly switched to expect a 75 basis point increase in the Fed Funds target rate on Wednesday in the wake of another painful overshoot in consumer inflation in May. Producer price inflation data for the month are due at 8:30 AM ET (1230) and look likely to cement such expectations, with a consensus forecast for another hefty 0.8% increase in prices from April.
The benchmark 10-year Treasury yield rose by the most this year on Monday as investors scrambled to re-price rising interest rate risks. At 3.32%, it now trades roughly level with the 2-Year note, having briefly traded through that level on Monday. A sustained period of short-term rates trading above long-term ones has historically been a reasonably reliable predictor of recessions.
It has been a rough spell for the Australian dollar, which has steadied after a four-day slide. This downswing saw AUD/USD plunge over 300 pips and break below the symbolic 0.70 cent level.
The US inflation report and expectations that the Fed will remain very aggressive have raised fears of a recession in the US.
This has allowed the US dollar to surge, especially against risk-related currencies like the Australian dollar. Back in early April, AUD/USD was trading close to the 0.76 line, but the Aussie has been hammered, with drops of some 400 pips in April and May.
With US inflation hitting a new 40-year high of 8.6%, some commentators are using the word “panic” to describe the financial markets. There are voices calling on the Fed to deliver a massive 0.75% hike at today’s meeting, though it would be a shock if the Fed did anything other than raise rates by 0.50%.
The Australian dollar didn’t get any relief from Australian releases, as NAB Business Confidence for May slowed for a second straight month, with a reading of 6 points, down from 10 previously.
We’ll get a look at Westpac Consumer Confidence for June later today. The May reading came in at -5.6%, and another sharp loss could see the Aussie resume its downward movement.
• There is weak support at 0.6902, followed by support at 0.6765
• There is resistance at 0.6973 and 0.7110
This is an article not Financial Advice always do your own research
If you have questions you can write it in the comments below and I will answer them
And please don’t forget to support this idea with your likes and comments
Market consensus has rapidly switched to expect a 75 basis point increase in the Fed Funds target rate on Wednesday in the wake of another painful overshoot in consumer inflation in May. Producer price inflation data for the month are due at 8:30 AM ET (1230) and look likely to cement such expectations, with a consensus forecast for another hefty 0.8% increase in prices from April.
The benchmark 10-year Treasury yield rose by the most this year on Monday as investors scrambled to re-price rising interest rate risks. At 3.32%, it now trades roughly level with the 2-Year note, having briefly traded through that level on Monday. A sustained period of short-term rates trading above long-term ones has historically been a reasonably reliable predictor of recessions.
It has been a rough spell for the Australian dollar, which has steadied after a four-day slide. This downswing saw AUD/USD plunge over 300 pips and break below the symbolic 0.70 cent level.
The US inflation report and expectations that the Fed will remain very aggressive have raised fears of a recession in the US.
This has allowed the US dollar to surge, especially against risk-related currencies like the Australian dollar. Back in early April, AUD/USD was trading close to the 0.76 line, but the Aussie has been hammered, with drops of some 400 pips in April and May.
With US inflation hitting a new 40-year high of 8.6%, some commentators are using the word “panic” to describe the financial markets. There are voices calling on the Fed to deliver a massive 0.75% hike at today’s meeting, though it would be a shock if the Fed did anything other than raise rates by 0.50%.
The Australian dollar didn’t get any relief from Australian releases, as NAB Business Confidence for May slowed for a second straight month, with a reading of 6 points, down from 10 previously.
We’ll get a look at Westpac Consumer Confidence for June later today. The May reading came in at -5.6%, and another sharp loss could see the Aussie resume its downward movement.
• There is weak support at 0.6902, followed by support at 0.6765
• There is resistance at 0.6973 and 0.7110
This is an article not Financial Advice always do your own research
If you have questions you can write it in the comments below and I will answer them
And please don’t forget to support this idea with your likes and comments
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