Today’s Notable Sentiment Shifts

USD – The dollar fell for a second straight session on Tuesday, after hitting a 18-month peak at the end of last week, on weak PMI data and after Fed members pushed back against aggressive rate hikes this year.

ISM Manufacturing PMI fell to a 14-month low in January, dropping to a reading of 57.6 from 58.8 in December.

Amongst the chorus of Fed speakers on Tuesday was Fed’s Daly, who stated that the Fed is poised for a March rate hike, but after that, she wants to “see what the data brings” and “get through omicron”.
A similar tone was echoed by Fed’s Bostic, who said that “we are going to need to be thinking very carefully about how things are going, how the economy responds to our first moves… We are not set on any particular trajectory. The data will tell us what is happening.”

AUD – The Australian dollar initially sold off on Tuesday after the RBA fell short of hawkish expectations at their February policy meeting. However, its weakness was eventually pared, with market participants seemingly undeterred by Governor Lowe’s comments.

Summarising the meeting and Australia’s monetary policy outlook, Westpac stated that “it was a clearly dovish message. The Governor has certainly gone out of his way to dissuade pricing for a hike in the first half of the year.” But continues to believe that their “August meeting expectation appears well placed… So while yields at the front end and out to 3-years will be lower, they will only be marginally so and we remain better sellers into strength, despite the RBA message.”