Greenback Falters In Corrective Pullback, Aussie Dollar Outperforms

The greenback corrected its recent rally, with BBDXY moving away from new cycle highs printed Tuesday, as Tokyo trade saw U.S. Tsy yields ease across the curve. The FOMC's monetary policy announcement provides the obvious focal point today. Markets fully price a 75bp rate hike come the end of the meeting, in the wake of steep addition of hawkish bets early this week.

• Expectations of more aggressive tightening have also been building in Australia. Goldman Sachs revised their RBA call and now expect two 50bp hikes to the cash rate target in both August and September (prev. 25bp on each occasion) after RBA Gov Lowe's latest remarks were interpreted as a hawkish sign.
• Rising perceived odds of larger rate hikes from the RBA and an above-forecast boost to the minimum wage supported the Aussie dollar, allowing it to outperform despite bleak reports on domestic consumer confidence. Monthly Westpac survey and weekly ANZ-Roy Morgan survey both showed that sentiment approached recessionary territory.
• AUD/USD climbed past the $0.6900 mark and is poised to snap a five-day sell-off. Antipodean cross AUD/NZD rose after four consecutive days of losses. AUD/JPY climbed after charting a Doji candlestick Tuesday, when its 50-DMA cushioned losses.
• USD/JPY refreshed multi-decade highs in early trade before faltering in tandem with broader greenback sales. The pair popped higher as the BoJ conducted its debt-buying operations, but that recovery attempt proved shallow. Implied volatilities remained elevated, while 1-month risk reversal showed strengthening bearish bias among options traders.
• Notable data releases include U.S. retail sales & Empire M'fing, EZ industrial output & the final reading of French CPI. The central bank speaker slate is tightly packed with ECB members, but the press conference with Fed Chair Powell will most likely steal the show.