AUD pressured by Fed cuts to stimulus
US share markets lifted overnight, boosted by a bounce in the Philadelphia factory index headline measure.
This bounce was enough to offset a further fall in existing home sales and a marginal increase in initial jobless claims overnight.
The S&P 500 index rose by 0.6% and the Dow Jones lifted 0.7%.
US 10-year Treasury bond yields fell 3bps overnight to 2.74% following Wednesday night's FOMC-induced 10bp rise.
US 2-year Treasury bond yields are unchanged at 0.4%.
Arguably, markets remain doubtful that the FOMC's expectations will be met, keeping a lid on term rates.
Australian 3-year and 10-year government bond yields (implied by futures) edged back by 2bps and 3bps to 3.05% and 4.15%, respectively.
The AUD struggled yesterday, weighed down by the Fed decision to reduce their monthly stimulus measures by US$10bn per month.
Support near USD0.9000 held firm, however, and the currency has rallied overnight.
Although there was little in the way of Australian data yesterday, the release of New Zealand fourth quarter GDP data showed the New Zealand economy is strong and further rate hikes are likely in NZ.
AUD/NZD has underperformed this year largely due to the NZD's strength; however, support at 1.0500 appears to be quite strong with a lot of the good news regarding the NZ economy already factored into the price.
The USD strengthened across the board overnight, with the Fed decision combining with European geo-political tension to push most European currencies lower.
EUR/USD had been set to test the 1.4000 level last week, however, it is now 200 points lower and likely to re-enter the consolidation zone between 1.3500 and 1.3800.
GBP also underperformed overnight as US economic data came out stronger than expected and confirmed the Fed's decision.
Gold capped the biggest four-day drop since November after the US Federal Reserve stoked the outlook for higher interest rates yesterday morning.
Meanwhile, the West Texas Intermediate price for crude oil fell for the first time in three days as the USD strengthened and US stockpiles grew for a ninth week.
Most other commodity prices also ended overnight weaker.
There was no major economic data released in Australia yesterday and none is scheduled for today.
Next week, a number of speeches by RBA officials Lowe and Stevens will be the highlight together with the release of the RBA Stability Review.
Russia came under some more pressure after US President Obama announced that he would enforce sanctions and that these would "affect the Russian economy".
German Chancellor Merkel also added that "economic sanctions" would be used "if necessary" after the Ukraine UN ambassador said that South and East Ukraine was about to be invaded.
German producer prices contracted by 0.9% in the year to February, slightly better than the cycle low struck in January.
GDP rose by 0.9% in the December quarter, in line with consensus expectations.
On a year ago, GDP growth expanded 3.1%.
Economic activity was buoyed by business investment, food manufacturing, dairy exports, and consumer spending.
Nominal GDP or GDP at current prices ran at a blistering hot 9.3% for the year.
The strong GDP result supports the decision by the Reserve Bank of New Zealand to lift interest rates last week.
The outcome also reinforces our expectation that the RBNZ will cut the official cash rate by a further 25bp at next month's policy meeting.
The CBI industrial trends survey showed new orders rising from 3 to 6 in March, still the fourth highest reading since prior to the GFC recession in 2008-09.
Initial jobless claims were encouraging overnight.
There were 320,000 initial claims for unemployment in the week ended March 15 following 315,000 in the prior period, the lowest back-to-back readings since late November.
The Philadelphia Fed's factory index rose to 9 this month from minus 6.3 in February.
Readings greater than zero signals growth in the area covering eastern Pennsylvania, southern New Jersey and Delaware.
A report from the Conference Board showed the index of leading indicators, a gauge of the outlook for the next three to six months, climbed 0.5% in February, the biggest gain since November, after a 0.1% advance in January.
Purchases of existing homes declined 0.4% in February to a 4.6 million annual rate, which is the lowest level since July 2012.
Sales have been slowing since the middle of last year and reflect a pickup in borrowing costs, declining affordability and, more recently, bad weather.
The Fed released the results of bank stress tests: 29 of 30 passed stress scenarios.
Zions Bancorp fell short of minimum capital levels under stress scenario.
In addition to the 18 institutions that have been part of the stress tests since 2009, an additional twelve firms with assets greater than US$50 billion were included this year.