• U.S. Dollar Trading (USD) was weaker on Wednesday after the Fed yet again cut rates by 0.25% to 2.00% for the seventh time since September last year. The votes counted 8-2 in favour of the cut, with only Fisher and Plosser preferring no change. The accompanying statement which was widely expected to suggest the Fed would ease its rate cutting for now, only hinted at the Fed’s future course of action by suggesting indicators of inflation expectations have risen in recent months. The market took these sorts of comments as affirmation that the Fed is near a pause in rate cutting but is leaving the door open to further rate cuts should the economy need the relief. US GDP for Q1 grew by 0.6%, surpassing forecasts of a 0.2% growth, suggesting the economy is still grinding ahead despite the plaguing financial turmoil. In other data news, the ADP Employment report for April improved from 8k in March to 10k, far outstripping expectations of a fall to -60k. Chicago PMI for April increased to 48.3, beating forecasts of a decline from 48.2 in March to 47.5. Core PCE for Q1 came in slightly above expectations of 2.1% to 2.2%, but this was a drop from 2.5% for Q4. In share market news, the Dow Jones fell by 12 points (-0.1%), while the NASDAQ lost 13 points (-0.6%). Oil prices fell US$2.17 a barrel to US$113.46. Looking ahead, more key data comes out on Thursday with the Manufacturing ISM report for April with forecasts of a drop from 48.6 to 47.5. Jobless claims are also released on Thursday with expectations of a rise from 342k to 365k.
• The Euro (EURO) appreciated against the greenback on Wednesday as the Federal Reserve cut rates by 25bps to 2.00%, its lowest level in almost four years. In data news Euro Zone Consumer Sentiment came in slightly better than forecast with a level of -12. Euro Business climate for April came in below forecasts of 0.7, with a level of 0.44. The Euro Unemployment rate for March came in as forecast at 7.1%. Euro’s Economic sentiment for April also came in below the forecasted level of 99 seeing a result of 97.1, indicating the economic outlook is waning. The EURUSD traded at a high of 1.5644 and a low of 1.5517 before closing at 1.5633 in New York. Thursday is a market holiday throughout the Euro so no data will be released.
• The Japanese Yen (JPY) strengthened slightly on Wednesday following a softer dollar after the Fed cut rates to 2.00%. The BoJ yesterday maintained their current rate stance at 0.5% as expected, keeping it as the lowest rate amongst the major economies. The USDJPY traded at a high of 104.89 and a low 103.70, before closing at 103.94 in New York. No major data is being released from Japan on Thursday.
• The Sterling (GBP) traded on the back of the majors on Wednesday as no data was released in the UK. The GBPUSD traded at a high of 1.9895 and a low of 1.9624, before closing at 1.9879 in New York trading. Looking ahead, PMI Manufacturing for the month of April is announced on Thursday with forecasts of 50.9, slightly down from 51.3 for March.
• The Australian Dollar (AUD) was among the best performing majors on Wednesday as the rate cut in the U.S prompted investors to look towards the higher yielding currencies like the Aussie and Kiwi dollars. The AUDUSD traded at a low of 0.9312 and a high of 0.9471, before closing at 0.9463 in New York trading. Looking ahead, Friday sees the release of March’s Retail Sales figures with expectations of a decline to -0.3%, down on February’s result of -0.1%.
• Gold (XAU) prices dropped on Wednesday despite a weaker dollar, with reasons being the appeal of the precious metal as an inflation hedge diminished as oil prices fell. Prices fell by US$11.70 an ounce to US$865.10, before gathering support to close near US$871.00.
• Euro – 1.5635
Initial support at 1.5510 (Apr 3 reaction low) followed by 1.5408 (Mar 25 Low). Initial resistance is now located at 1.561 (Apr 29 high) followed by 1.5707 (Apr 25 high).
• Yen – 103.70
Initial support is located at 103.70 (Apr 22 low) followed by 102.68 (Apr 22 low). Initial resistance is now at 104.88 (Apr 30 high) followed by 105.58 (76.4% retracement of the 108.61 to 95.76 decline).
• Pound – 1.9865
Initial support at 1.9624 (Apr 30 low) followed by 1.9600 (Apr 16 reaction low). Initial resistance is now at 1.9913 (Apr 29 high) followed by 1.9966 (Apr 28 high).
• Australian Dollar – 0.9435
Initial support a 0.9311 (Apr 30 low) followed by 0.9294 (Apr 29 low). Initial resistance is now at 0.9473 (Apr 30 high) followed by 0.9496 (Apr 24 high).
• Gold – 880.00
Initial support at 862.82 (Apr 30 low) followed by 873.00 (Apr 1 reaction low). Initial resistance is now at 896.50 (Apr 25 high) followed by 906.50 (Apr 24 high).