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Currency Market Analysis

Jun 26, 2019 | Currency Market Analysis

Global Themes

AUDUSD slips from two-week highs as Fed tempers cut talk

The AUDUSD climbed to the highest levels in over two weeks overnight before a pick-up in volatility unsettled markets after major speech from the US Federal Reserve chairman Jerome Powell.

Powell indicated the Fed would cut rates if required but also noted that the US economy, on balance, remains strong.

Powell said: “Many FOMC participants judge that the case for somewhat more accommodative policy has strengthened. But we are also mindful that monetary policy should not overreact to any individual data point or short-term swing in sentiment.”

Additionally, in another speech, St Louis Fed president James Bullard, who is typically seen as more prepared to cut rates, suggested the Fed won’t consider a 50-basis point cut saying "I don't think we have to take huge action…this is more in the realm of insurance.”

Safe havens

The AUDUSD saw only a small loss with the pair down 0.1%.

The Aussie was weaker in other markets with geopolitical tensions between the US and Iran causing investors to focus on safe haven currencies.

The AUDJPY neared five-month lows while the AUDCHF dropped to four-year lows.

RBNZ ahead

Today’s major regional announcement comes from the Reserve Bank of New Zealand as they meet for their six-weekly interest rate decision.

The market sees a 30% chance of a decrease after the RBNZ cut official interest rates for the first time in three years at their last meeting.

The RBNZ announcement is due at midday (AEST).

By Steven Dooley, Currency Strategist APAC

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