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Fed minutes fail to boost AUD/USD
AUD/USD was generally depressed throughout the trading session ahead of the release of the Fed minutes. Minutes of the meeting showed that Fed officials were cautious about lowering interest rates prematurely. They said they did not believe a rate cut would be appropriate until they were “more confident” that inflation was on a sustainable path towards the 2% target. While recognizing that risks are becoming more balanced with achieving the Fed’s twin mandates of maintaining price stability and maximizing employment, officials stressed that they will continue to focus on inflation risks. Fed officials also noted that while economic risks are tilted to the downside, remaining vigilant about inflation remains a top priority.
Following the release of the Federal Reserve meeting minutes, the 10-year U.S. Treasury yield resumed its upward move, rising three and a half basis points to 4.319% in late trading, while the dollar fell. The U.S. Dollar Index (DXY), which measures the dollar’s performance against six other currencies, fell 0.05% to 103.99.
Fed spokesperson remains hawkish, Aussie manufacturing PMI contracts
Richmond Fed President Thomas Barkin said at a news conference that the latest inflation data was “less than ideal” and showed concern about services sector inflation.
At the same time, Judo Bank announced its February Purchasing Managers Index, in which the Composite Purchasing Managers Index and the Services Purchasing Managers Index were better than the previous values and out of the recession zone. The services purchasing managers index was 52.8, higher than 491; the composite purchasing managers index was 51.8, higher than 49. The manufacturing PMI came in at 47.7, down from the previous reading of 50.1, indicating that manufacturing activity is contracting.
Warren Hogan, chief economist at Judo Bank, said February’s purchasing managers’ index weakened the case for monetary policy to be eased soon. If anything, improving activity indicators and a modest pickup in the price index in 2024 suggest that risks to monetary policy remain balanced.
