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Markets hold steady ahead of FOMC interest rate decision

BY SHAMEEM MUSA

The Australian dollar advanced against the US Dollar on Monday trading a 24-hour high of 0.7546. Yesterday was a public holiday in Australia (except QLD and WA) celebrating the Queen’s Birthday.  Therefore there were no scheduled macroeconomic data releases yesterday. Looking ahead today at 11.30am AEST will see the release of NAB Business Confidence for the month of May. The AUD/USD pair is currently trading at 0.7539. We now expect support to hold on moves approaching 0.7500 while any upward push will likely meet resistance around 0.7565.

With world-wide macro-economic events contributing to a general indecisive market, The NZD trades this morning within a narrow, 15 pip range around the 0.72 level. We did see a large 20 pip drop at the end of the Asian session but the Kiwi regained its losses on open of the European session.  The Kiwi appears to be treading water ahead of a number of key data releases in the US, with the FOMC and NZ GDP both expected on Thursday morning. Over in the UK, the NZD/GBP has risen considerably since the UK election but has reversed some of these gains and currently trades at 0.5685. Across the Tasman, the Australian holiday yesterday led to a quiet local market with the NZD/AUD currently trading at 0.9550. 

The Great British Pound remains under pressure as the fallout from the UK Election continues. As Prime Minister Theresa May continues to try and form a majority government, selling of the Sterling resumed overnight from intraday highs of 1.2770 on close of the Asian trading session. With no agreement as of yet with the conservative Irish party – DUP, we saw cable fall 1% to as low as 1.2640 in overnight trading and 2.5% since the start of the election. As Theresa May’s position weighs in balance, the market turns its attention to this month’s UK inflation reading which is expected to remain steady at the annualised rate of 2.7% for the month of May. The British Pound opens this morning at 1.2670 against the Greenback. It is also lower against the Australian dollar – 1.6800 and New Zealand dollar of 1.7580.

It was mostly a quiet session overnight given the lack of any top tier macroeconomic data. The EUR/USD pair moved above 1.12 early in the session and touched a high of 1.1232 after the French President Macron looks to take an overwhelming majority in parliament after first round elections held on Sunday. The Greenback is holding steady ahead of Wednesday’s interest rate decision, it is widely expected the Fed will raise rates by 25 basis points and investors will be closely watching for indications on the pace of further tightening in their statement release. Meanwhile in Japan, Core Machine Orders fell more than expected, the drop came in at 3.1% in April vs an estimate for a 0.5% gain. USD/JPY reacted very little to the data.