The Australian dollar is getting poleaxed

Scott Barbour/Getty Images

The Australian dollar is getting poleaxed, falling heavily following the release of the minutes from the US Federal Reserve’s January interest rate meeting.

Here’s the scoreboard as at 7.45am AEDT.

AUD/USD 0.7814 , -0.0067 , -0.85%
AUD/JPY 84.13 , -0.45 , -0.53%
AUD/CNH 4.9506 , -0.0463 , -0.93%
AUD/EUR 0.6356 , -0.0031 , -0.49%
AUD/GBP 0.5612 , -0.0018 , -0.32%
AUD/NZD 1.0663 , -0.0059 , -0.55%
AUD/CAD 0.9914 , -0.0055 , -0.55%

It’s been an ugly session for the Aussie, losing ground against all of the major crosses, especially the greenback.

Having fallen steadily before the release of the FOMC minutes, the AUD/USD initially jackknifed higher once the minutes hit the screens, erasing all of its earlier losses as traders took the view that the tone was less hawkish than many had earlier feared.

However, as seen in the 5-minute AUD/USD chart below, it didn’t take traders long to remember that these minutes predated the release of hotter-than-expected US CPI, PPI and wage data for January which undoubtedly contributed to recent financial market turbulence.

Quick as a flash, the Aussie’s recovery was reversed and then some as stocks fell and US bond yields rose.

AUD/USD 5-Minute Chart

“Our take is that the minutes reflect events prior to the jump in hourly earnings seen in the January Jobs report and also prior to the extra spending bill passed by Congress early in February,” said Rodrigo Catril, FX Strategist at the National Australia Bank.

“This would suggest that there is a good chance that the current FOMC thinking has evolved towards a more hawkish tone since.”

Notably, benchmark 10-year US bond yields rose to a new cyclical high of 2.95%. 2-year yields — more sensitive to expectations for near-term interest rate movements — also pushed up to 2.27%, more than 10 basis points above where it traded last week.

Turning to the session ahead, there next to nothing on the Asian data calendar to excite currency traders. If anything, the resumption of trade in Chinese markets following Lunar New Year holidays appears to be the only highlight.

Given a lack of major data releases or speeches, the movements in the Aussie today will likely be influenced by sentiment and technicals.

Later in the day, the economic calendar picks up a little in Europe and North America.

Markets will receive CPI data from France and Italy, Q4 GDP and retail turnover figures from the UK, German business confidence, Canadian retail sales along with jobless claims, leading index and crude oil inventory data from the EIA in the US.

On the central bank front, the ECB will release the minutes of its January policy meeting while Bill Dudley, New York Fed President, will also be in action.

The US Trasury will also conduct a 7-year note auction.

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