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Weaker dollar fuels commodities and shares

An uneventful speech from US Federal Reserve Chair Jerome Powell on Friday night saw the US dollar weaken and bond yields fall. In turn this helped push metals and oil higher, and the S&P500 index hit a new record high. Asia Pacific markets are likely to open positively, although stronger local currencies could bring caution.

Mr Powell’s speech re-iterated the known Fed stance. Interest rate moves are data dependent, the Fed is comfortable with the inflation rate and the US economy remains robust. The dovish reaction from currency and bond traders suggests at least some were looking for a stronger stance and possibly a warning of more than two more hikes this year. With only industrial profit data from China due today this dynamic may drive local markets.

The Australian reporting season enters its final week. Plumbing group Reliance Worldwide showed a 0.6% profit increase and earnings at the bottom end of guidance. This could bring a sharp share price reaction as the stock is trading close to all-time highs. Higher gold, copper and aluminium may see investors return to the Materials sector after a fortnight of sustained pressure.

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