Following a tumultuous Wednesday and Thursday, markets went out with something of a whimper on Friday. Stocks continued to rally in both Europe and the U.S, while Treasury yields extended their post-FOMC falls.  The dollar rallied smalls with every G10 currency giving back a little of their sharp mid-week gains – led by a 0.7% fall in the kiwi.

In FX, the narrow DXY dollar index dollar added back 0.34% but was still well down on the week (-1.1%). The broader BBDXY index was +0.26% but -1.3% on the week.

EUR/USD drove the rise in the DXY, -0.42% to 1.1270. USD/JPY +0.14% to 111.55. AUD/USD ceded a little ground, -0.54% to 0.7608 having been as high as 0.7637.  NZD -0.7% to 0.6804 having been as high as 0.6828.

In stocks, US indices added about 0.5% on average, S&P500 +0.44% to 2049.58.  The Dow finished +0.69% and the NASDAQ +0.43%.  In Europe where the Eurostoxx50 added 0.55% though is 0.5% down on the week. The German Dax +0.59% to be 1.2% up on the week.  The VIX dropped a further 0.42 to 14.03, having traded on a 13 handle for part of Friday (low of 13.75).  We shouldn’t underestimate the importance of this when assessing the drivers of the AUD’s current ascent.

In US rates, bonds modestly extended their post-FOMC rally.  2s finished 2.8bps lower at 0.837% (-12bps on the week) and 10s -2.3bps to 1.874. In commodities, generally modest slippage was consistent with a slightly firmer US dollar. Then exception was iron ore which put on $1.40 to $57.40 (putting it up 40 cents on the week).  The LMEX index of traded metals fell 0.61%, gold lost $10.7 to $1254.30 and oil slipped WTI -$0.80 to $39.44 and Brent -$0.30 to $41.20.

CFTC/IMM positioning data for the w/e 15 March shows overall USD speculative longs versus G10 currencies were further trimmed back just in front of the FOMC, to +43.2k from +55.3k. This was driven by significant paring of shorts in GBP (to -13.6k, in sharply from -49.0k in what was a week that saw incoming ‘Brexit’ polls reveal a shift in favour of the ‘remain’ camp (subsequently reversed).  In contrast net EUR shorts were slightly extended in what was ECB week, -77.6k from -71.9k.  AUD net longs were also pared back pre-Fed and Australian labour force data (evidently to some regret) – in to 12.8k from 29.2k.  JPY net longs reduced to 45.5k from 64.3k; NZD positioning flipped from a small net short to small long (-2.0k to +1.3k).

The main data on note Friday was the University of Michigan’s March US preliminary consumer sentiment index, which fell to 90.0 from 91.7 and beneath the 92.2 expected. Weaker US stocks at the beginning of March were blamed.  More significant to our minds, the 5-10 year inflation expectations reading rose to 2.7% from 2.5%, as did the 1-year reading. Fed speak came from the ever-forthright James Bullard (a current FOMC voter) who said in prepared remarks that the U.S. central bank’s inflation and employment goals have essentially been met and it would be “prudent” to edge interest rates higher.

Sunday’s CoreLogic RP data preliminary auction clearance rates, in what was the busiest weekend of the year as is typical the weekend before Easter, shows the weighted average capital city clearance rate up to 71.5% from last weekend’s 64.9%.  Sydney cleared 75.5% up from 71.2% and Melbourne 72.3% up from 68.6%.

Coming Up

It threatens to be a quiet week, but at least it’s a four day one.  In Australia, RBA Governor Glenn Stevens’ speech Tuesday, at an ASIC forum, looms large in what is an otherwise quiet week with only second tier data only. Markets will be on guard for some renewed jawboning on the currency. Lack thereof will likely be a catalyst for new post July 2015 highs. We might also learn more about prospects for a Double Dissolution and July elections.

In New Zealand there are no major releases with consumer confidence Monday, trade figures Thursday, and residential lending figures also Thursday.

China faces a quiet week with no significant data, probably meaning the daily CNY fixes will be the main focus amid signs that the authorities are allowing/orchestrating a softer renminbi in basket/index terms.

In the US it’s a quiet week for data, leaving Fed speak as the likely main market moving influence.

Japan releases CPI on Good Friday. Eurozone PMIs on Thursday will be important, as will UK CPI on Tuesday and Retail Sales Thursday. The Canadian Budget is on Tuesday.

Overnight

On global stock markets, the S&P 500 was +0.40%. Bond markets saw US 10-years -2.26bp to 1.87%. On commodity markets, Brent crude oil -0.82% to $41.2, gold-0.8% to $1,254, iron ore +2.5% to $57.50. AUD is at 0.7607 and the range since Friday’s local close has been 0.7595-0.7645.

The 2016 Euromoney FX poll is now open for voting and may be accessed at www.euromoney.com/FX2016

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• Markets Today: 21 March 2016 (PDF, 1MB)

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