Analysts at Westpac offered a market wrap.
Global market sentiment:
US equities made fresh record highs, and the USD and interest rates probed higher. The news flow (Trump-Abe meeting, Tarullo resignation) was mostly supportive of these moves.
US 10yr treasury yields initially rose from 2.40% to 2.43% before consolidating and closing at 2.41%. The 2yr ranged between 2.18% and 2.20%. Fed fund futures firmed 1bp, pricing the chances of a March meeting hike at around 20% but the June meeting at 100%.
Fed Governor Tarullo’s sudden resignation was seen as another post the Trump administration could fill this year, along with the Atlanta and Richmond President posts. Markets are expecting Trump appointments to be hawkishly biased.
FOMC VC Fischer spoke but avoided the economy and monetary policy. Mester (hawk) said the Fed was not behind the curve.
The US dollar index closed around 0.2% higher on the day, trading at a three-week high. EUR fell from 1.0660 to 1.0608 before consolidating. USD/JPY was volatile but closed little changed at 113.55. AUD outperformed, rising from 0.7635 to 0.7689, coinciding with a rise in iron ore to a 2 ½ year high of $86.62. NZD rebounded in NY from 0.7174 to 0.7210. AUD/NZD extended its Feb rally from 1.0620 to 1.0679 – a 3 ½ month high.
CFTC futures positioning data showed speculators increased both AUD and NZD longs in the week to last Tuesday. Yen shorts were reduced."