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The Australian and New Zealand dollars are under some pressure independent of the US dollar. Both reported poor data. Austral reported a 6.4k drop in employment. The Bloomberg survey's median forecast was for a 16k increase after 13.5k in January. The unemployment rate ticked up to 5.9% from 5.7%, while the participation rate was unchanged at 64.6%. One positive aspect of the report was the mix of full and part-time jobs. Full-time positions increased by 27.1k after a 44.1k decline previously, while there were 33.5k less part-time jobs after a 57.5k surge in January.

New Zealand reported Q4 GDP expanded by 0.4% not the 0.7% expected and Q3 growth was revised to 0.8% from 1.1%. This puts the year-over-year rate at 2.7% down from a revised 3.3% (was 3.5%) in Q3.

The Australian dollar pushed back from the nearly $0.7720 high seen in the US to a little below $0.7680 in Asia. However, it has been better supported in the European morning, perhaps helped by the reports of a large foreign acquisition in the energy space.

The drop in US yields weighed on the dollar against the yen. It fell from the upper end of its two-month range toward the middle of it. It was near JPY114.50 before the Fed announcement and was pushed a little through JPY113 in early European activity. It managed to recover to around JPY113.50 before stalling, seemingly awaiting fresh cues from the US session.

Risk appetites like the confluence of political and economic developments.  European peripheral bonds are firmer, while core bonds are mostly heavier. MSCI Emerging Market equity index is extending its rally into a sixth consecutive session and the nearly 2% gain thus far today is the most since last July.  The MSCI Asia-Pacific Index rose nearly 1.5%, for a five-day streak.  European markets are following suit. The Dow Jones Stoxx 600 is up 0.6%, after a gap higher opening. It is the second advance in a row, and six of the past seven sessions. Materials are up the most, followed by energy and financials.  Iron ore prices edged higher to bring this week's rise to 11%. Rebar steel eased after yesterday's rally lifted it its highest closing level since December 2013. Oil prices are up about 1%, helped by the first decline in US inventories this year and the heavier dollar tone.

The US session features February housing starts and permits, weekly jobless claims JOLTS and the March Philadelphia Fed. Given the Fed's move, we suspect the market will not be particularly sensitive to the data. Attention may shift to fiscal policy where President Trump has provided an outline for the budget for the remainder of the year. It looks to increase defense and security spending (and a little for education) and cutting other programs, some like the State Department and Environment Protection Agency deeply.  The opposition from the Republican Party appears to be based more in the Senate than the House.

Marc Chandler
Global head of currency strategy at BBH
Brown Brothers Harriman

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