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AUD consolidates above 0.7100

Published January 8, 2019

by Nicholas Cork

A night of consolidation as the market continues to convince itself that Fed Chair Powell’s use of the word ‘patient’ has signaled a change in policy direction for the FOMC, and rate hike expectations were further tempered as a result.  The odds of a rate cut in the US by Jan 2020 has now risen from just 5% a month ago to well over 50% today, and the Atlanta Federal Reserve President has overnight suggested maybe just one hike in 2019 and that’s it. The USD remained under pressure as recent safe-haven buying of CHF and JPY was unwound, and was lower against nearly all of its counterparts this morning.  Traders were further bolstered by US data overnight showing that their services sector activity has slowed to a 5 month low, however it must be noted that it has remained above levels consistent with solid economic growth. US-CHINA trade talks appear to be progressing well with positive statements from both sides and an appearance at the talks by the Chinese VP, and the market is expecting further positive statements today.  Tomorrow we will bear witness to a press conference from the US president before he heads to the border, ‘I am pleased to inform you that I will Address the Nation on the Humanitarian and National Security crisis on our Southern Border. Tuesday night at 9:00 P.M. Eastern’, and with the recent flip from concrete to steel no-one knows what to expect.

The AUDUSD had a quiet session overnight but was notably supported on dips lower, and is at the upper end of the overnight range towards 0.7150 this morning.  Trade data for November is expected today, and worth noting the last two releases have been well away from market expectations, so worth having a look at 11.30 Syd time.

AUDUSD consolidates (Reuters)