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FOREX: AUD Pierces Support as Inflation Softens

FOREX
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  • JPY is trading somewhat firmer early Wednesday, with markets eyeing reports overnight that the Japanese finance minister had held talks with his newly-minted US counterpart Bessent, at which the two discussed FX policy on top of financial and geopolitical issues. Given the Trump administration's sensitivity to weaker currencies for trading partners, markets have bid the JPY slightly higher to keep USD/JPY pinned to the Y155.00 pivot level for now.
  • Australian inflation data overnight came in modestly softer than expected, leading to AUD weakness headed into the Wednesday open. AUD/USD plumbed a pullback low at 0.6227 - piercing the 50% retracement for the upleg posted off the cycle low in mid-January in the process. As a result, AUD and NZD are the poorest performers in G10 FX so far.
  • The Fed decision ahead is the market focus, with markets likely to look through an unchanged decision on rates policy to narrow in on any fresh market pricing for the Fed's terminal rate. Markets are priced for ~50bps of further easing into year-end, and the USD will be sensitive to any direct messaging from Powell on pricing, particularly any suggestion that the Fed could go further with easing in the face of growth and tariff risks this year.
  • Equity sensitivity will come into further focus later today, with a raft of earnings set for after-market. AI-adjacent stocks including Tesla, Microsoft, IBM and Meta Platforms are due - within which any reference to the rapid rise of China's DeepSeek will be carefully watched. 
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  • JPY is trading somewhat firmer early Wednesday, with markets eyeing reports overnight that the Japanese finance minister had held talks with his newly-minted US counterpart Bessent, at which the two discussed FX policy on top of financial and geopolitical issues. Given the Trump administration's sensitivity to weaker currencies for trading partners, markets have bid the JPY slightly higher to keep USD/JPY pinned to the Y155.00 pivot level for now.
  • Australian inflation data overnight came in modestly softer than expected, leading to AUD weakness headed into the Wednesday open. AUD/USD plumbed a pullback low at 0.6227 - piercing the 50% retracement for the upleg posted off the cycle low in mid-January in the process. As a result, AUD and NZD are the poorest performers in G10 FX so far.
  • The Fed decision ahead is the market focus, with markets likely to look through an unchanged decision on rates policy to narrow in on any fresh market pricing for the Fed's terminal rate. Markets are priced for ~50bps of further easing into year-end, and the USD will be sensitive to any direct messaging from Powell on pricing, particularly any suggestion that the Fed could go further with easing in the face of growth and tariff risks this year.
  • Equity sensitivity will come into further focus later today, with a raft of earnings set for after-market. AI-adjacent stocks including Tesla, Microsoft, IBM and Meta Platforms are due - within which any reference to the rapid rise of China's DeepSeek will be carefully watched.