Aussie & US dollars move in chorus as central banking policy becomes trendy again, ASX futures down 30 points

Central banks are waking up from their holidays and the world is once again becoming focused on the mundane yet provocative nature of contemporary interest rate policy. The US Federal Reserve made its statement this morning after its two-day catch-up and softened its tone (you can read and compare it to the previous one here), leading the market to soften its expectation of a US rate hike in June/July ever so slightly. Under normal circumstances, when US interest rate traders' softer expectations this flows through to FX pricing, and the US dollar would weaken on the back of such an event as the Australian dollar lifts. However, as you can see in today's second chart, that negative or inverse correlation between the AUDUSD and US dollar index broke down following the Fed announcement because currency traders are seeing this is the Fed giving the RBA the go-ahead to soften its view on interest rate policy also.
The US Federal Reserve doesn't meet again until mid-March 2016, and it would be nice if the market decided not to–once again–spend a year ruminating on the direction of interest rate policy because there is nothing particularly insightful coming out of developed economy central banks by way of research at present. This is chiefly due to the lack of inflation trends. If inflation isn't trending one way or the other, currency levels are palatable and employment figures are perfectly acceptable, then the central banks don't really know what they're fighting for and we'll continue to receive ambiguous, arbitrary, short-sighted statements that are absolutely not worth focusing on.
As indicated in today's third chart, the ASX 200–while happily consolidating–isn't showing signs of trending just yet and hasn't managed to close consistently above 5,000, with the Monday just passed the only time it has done so in the last three weeks.
Expected volatility in the US hasn't fallen much from its January peak, so investors remain in a position where they are right to brace for continued volatility – in reference to the investor cycle below, we're likely sitting somewhere between Desperation and Depression, but I think it's safe to say that the 'Denial' phase linked to any "It'll be alright" attitude toward China and commodity prices is far behind us, and I've witnessed plenty of Fear, Desperation and Panic over the last six to eight weeks. 

Source: Rivkin, Saxo Bank
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This article was written by Scott Schuberg, CEO of Rivkin Securities Pty Ltd. Enquiries can be made via [email protected] or by phoning +612 8302 3600.