With no fresh report to price in, Asian session traders focused on themes from the previous sessions.
- FOMC member Kashkari: Neither inflation nor wages signalling overheating economy
- AUD and NZD gain on Draghi’s tapering comments
FOMC member Kashkari’s speech
Minneapolis Federal Reserve President and FOMC voting member Neel Kashkari repeated his case that there’s no urgency for steady rate hikes.
In a speech in Michigan, Kashkari asked “Why are we trying to cool down the economy, when there may still be some slack in the job market, and there is still some room to run on the inflation front?,” adding that “We’re not seeing wages climb very fast, and we’re not seeing inflation. That tells me the economy is not on the verge of overheating.”
If you recall, Kashkari was the sole dissenter in the Fed’s (widely expected) decision to raise its interest rates in June.
Draghi’s tapering comments boosts AUD, NZD
With not a lot of new reports to price in, Asian session traders played catch-up to yesterday’s economic themes.
Recall that Draghi fired up the euro yesterday when he hinted that the ECB will be “adjusting the parameters of its policy instruments” in response to a recovering economy.The idea of the ECB buying less government bonds weighed on Australian and New Zealand’s own government bonds, as market players speculate that other major central banks *cough* RBA and RBNZ *cough* will follow the tightening trend by raising interest rates.
This then pushed yields higher, and increased the demand for their respective currencies. A long stretch, but hey, it’s a slow market day after all.
It might have also helped that the Aussie received a bit of boost from yesterday’s jump in iron ore prices. Analysts pointed to end-of-quarter profit-taking, though optimistic comments from China’s officials also factored in.
Last but not the least is the dollar’s overall weakness, which resulted from a one-two-punch delay in the GOP’s health care bill vote and Janet Yellen failing to pepper enough hawkish remarks in her speech yesterday.
Major Market Mover(s):
Risk appetite and dollar weakness contributed to the comdolls’ gains against lower-yielding currencies like the dollar and the yen.
AUD/USD is up by 12 pips (+0.16%) to .7603, USD/CAD is down by 20 pips (-0.15%) to 1.3146, and NZD/USD is back at its .7276 open price after dipping to .7262 during the session.
Meanwhile, AUD/JPY jumped by 11 pips (+0.13%) to 85.24, CAD/JPY is up by 9 pips (+0.11%) to 85.29, and NZD/JPY is back to 82.60 after slipping to 81.44.
Watch Out For:
- 6:00 am GMT: UBS consumption indicator (1.48 previous)
- 6:00 am GMT: German import prices (-0.6% expected, -0.1% previous)
- 6:00 am GMT: U.K. Nationwide house price index (0.1% expected, -0.2% previous)
- 9:00 am GMT: Italian preliminary CPI (0.1% expected, -0.2% previous)