Australian Dollar Weakens as RBA Says No Rate Hikes Planned

The Australian dollar has lost ground on Tuesday. AUD/USD has dropped by 0.31%, trading at 0.6604 in the European session at the time of writing.

Yen Extends Losses, Fed Members Cautious

The Japanese yen is down for a second straight day on Tuesday. USD/JPY has risen 0.45%, up 154.59, up 0.45% at the time of writing. The yen is down 1% this week after soaring 3.4% against the dollar a week earlier.

Sunset Market Commentary

There’s nothing to break the deadlock for now. Last week’s correction higher in US Treasuries and lower in USD following the Fed-payrolls combo isn’t met by real follow-up action this week. A very light eco calendar supports the current standstill. Lower volatility and last week’s bond correction prove fertile breathing ground for stock markets.

Fed Kashkari Comments Didn’t Bring Life into Mostly Sideways Dealings

Minneapolis Fed Kashkari (non-voter this year) gave us some flavor on how a slightly more hawkish shift at last week’s policy meeting could have looked like. His guidance sounded familiar: “the most likely scenario is we sit here for an extended period of time”. In its official statement, the onus remained on a policy rate cut though the bar to implement one was raised given little progress on inflation.

USD Extends Gains as Investors Shrug Off Fed Optimism

In the FX, the US dollar rebounded on a third day as FX traders somehow shrugged off the post-FOMC optimism that was certainly overdone. The EURUSD retreated to 1.0740. The daily graph says quite a lot on the euro sentiment, as the pair tested a major Fibonacci resistance, which also coincides with the ytd descending channel top, and bounced lower. That makes sense in the context of diverging policy outlook between the Fed and the European Central Bank (ECB).

Persisting Pressure on Crypto

The crypto market has lost 2% of its capitalisation over the last 24 hours to $2.29 trillion. Bitcoin is losing 1.8%, Ethereum – 1.7%. Among the top altcoins, Solana is experiencing the biggest decline of 4%, while BNB has lost the least, just 0.5%.

USD/JPY – Yen Weakness Prompts Warning from Tokyo

The Japanese yen is down for a third straight day and has declined 1.5% this week. USD/JPY has risen 0.43% on the day and is trading at 155.35 at the time of writing. Early Thursday, the BoJ will release the Summary of Opinions from the April meeting.

Canadian Dollar Slips Despite Strong Ivey PMI

USD/CAD has edged higher on Wednesday and is up 0.25%, trading at 1.3760 at the time of writing. Canada’s Ivey PMI climbed sharply in April to 63.0, up from 57.5 in March and beating the forecast of 58.1. This marked the highest level since May 2022, indicating that purchasing managers have seen an improvement in business activity. The employment and inflation components of the PMI both rose, which points to a healthy labor market and stronger inflationary pressures.

Could Monday's Intervention Turn the Tide for Yen?

Japan has a long history of market interventions, to weaken or prop up its currency. Several times since the 1990s, Japan, unilaterally or with help from its main trading partners, tried to turn the tide for the yen. A quick look at the most recent market interventions, including yen’s post-intervention performance, could offer valuable insight to what can be expected in the short-term for the yen after Monday’s activity. 

Focus Turns to Fed

Today's main event will be the FOMC meeting, where we and the markets expect no changes to the Fed's policy rate. With no new economic projections, focus will be on Powell's verbal guidance as well as on any hints on the Fed's plans to taper the pace of QT. Read more in Research US - Fed preview - Cuts still in the horizon, 26 April.