Moody’s Investor Service affirmed US Aaa rating. Outlook was also maintained as stable. Moody’s noted that “exceptional economic strength” of the US, very high strength of its institution, very low exposure to credit related-shocks. And that “counter balance” the lower fiscal strength.

The rating agency also noted that “diversity, dynamism, and competitiveness” of the US economy, Dollar’s status as the “pre-eminent international reserve currency” and the “very large size and depth” of the treasury market. These advantages will “offset rising fiscal pressures” from “ageing-related entitlement spending, higher debt service payments”, and recent policy actions that will likely lower revenues and increase expenditures.

Full release here

For now, Moody’s expected US and China to reach a trade deal eventually. However, Moody’s Senior Credit Officer William Foster said that “if things ultimately progress in a way that is outside of the base case, that would be negative for both countries and for the global market place, but our expectation is this will be negotiated back from the headlines you’re reading.”

Articles by ECB Executive Board member Yves Mersch and Governing Council member Vitas Vasiliauskas were published Wednesday by Eurofi today. While Mersch’s article was submitted back on March 21 and Vasiliauskas on March 15, there’re worth a quick read.

Mersch’s article was on the topic of “Monetary policy in the euro area: solid expansion with timid price pressure”. He noted that:

• “Confidence has recently risen and convergence is being confirmed — partly because the temporary decline in the inflation rate has been weaker than our internal calculations had predicted,”
• “More resilience will follow eventually. Still, patience and persistence with respect to our monetary policy is required.”

Vasiliauskas article was on the topic of “The time is approaching to seriously consider a smooth transition from the APP”. He noted:

• “We have witnessed the strengthening of broad-based growth and steadily declining unemployment, providing conditions for inflation convergence to our objective.”
• “This has increased my confidence that it is time to transition from the asset purchase program. However, the closure of the program should not be abrupt.”

Here are the articles.

Dollar index finally broke the medium falling trend line resistance after yesterday’s solid rally. And focus is now on 91.01 support turned resistance. Firm break there will then be another sign of medium term reversal.

That is, the down trend from 103.82 has completed at 88.25, after hitting 50% retracement of 72.69 to 103.82, on bullish convergence condition in weekly MACD. Next hurdle will be 55 week EMA (now at 92.93). But we’d expect the rally to extend to 38.2% retracement of 103.82 to 88.25 at 94.19 at least. Ideally, is should be accompanied by a solid break of 3% in 10 year yield.

Australia CPI was unchanged at 1.9% yoy in Q1, below expectation of 2.0%. RBA trimmed mean CPI rose to 1.9% yoy, up from 1.8% yoy and beat expectation of 1.8% yoy. RBA weighted median CPI was unchanged at 2.0% yoy, beat expectation of 1.9% yoy.

The Australian Bureau of Statistics noted in the  release that “while the annual CPI rose 1.9 per cent, most East Coast cities have continued to experience annual inflation above 2.0 per cent, due in part to the strength in prices related to Housing and Food. Softer economic conditions in Darwin and Perth have resulted in annual inflation remaining subdued at 1.1 and 0.9 per cent respectively.”

AUD/USD spiked lower to 0.7576 after the release but quickly recovered. Firstly, the decline is a bit stretched after AUD/USD fell for three days. Secondly, the CPI data just affirmed the case that RBA is in no rush to raise interest rate. For now, AUD/USD is on track for 0.7500 key support level in near term.