AUD makes new highs and consolidates break above US$0.65

Key Movers

The US dollar faced sustained headwinds Tuesday as US 10-year rates consolidated near two-month lows and domestic existing home sales fell at a much faster pace in October than expected, suggesting the Fed’s aggressive approach to tightening financial conditions is impacting the broader economy, muting the need for further rate adjustments. Against a backdrop of lower rates Asian currencies found support with the CNY and JPY both outperforming. The USD/JPY slipped below ¥148, marking lows at ¥147.15 before finding support.
The Great British pound traded largely flat for the day, consolidating a break above US$1.25 while the euro was the day's big loser. The single currency was the only major not to extend on gains against the USD as uncertainty grows surrounding Germany’s budget crisis after a constitutional court ruling blocked access to key off-budget spending tools creating a near 60 billion euro funding gap. The euro slumped below US$1.0950 marking intraday lows at US$1.0901 before finding support. Our attention now turns to the Fed meeting minutes. After last week's softer inflation print, we expect little shift in Fed policy, however, any jawboning that suggests a December rate hike is still on the table could trigger a reversal in recent gains and help the USD pare losses while a dovish undertone will help elevate market confidence in calls the Fed has reached the end of its tightening cycle.