Fed Minutes Slam Hawkish Hopes, Aussie Jobs Next

The FOMC minutes emphasized patience before rate hikes, sending the US dollar spiralling lower. The Canadian dollar was the top performer while the yen lagged. Up later it's the Australian jobs report with AUD/USD hovering near a five-month high.

The market wanted a sense of when the first Fed rate hike will come after Yellen's “six-month” comment. Instead, the FOMC minutes made no mention of a timeline and said most participants wanted the statement to explicitly say new guidance didn't imply any change in policy intentions.

Short-dated bonds rallied hard on the minutes. June 2014 eurodollar futures – which are a proxy for Fed hike expectations – have now completely wiped out the post-Fed decline.

The dollar was broadly weaker after the report, leading a third day of EUR/USD gains. With EUR/USD above 1.3850 the ECB will be growing uncomfortable. Governing Council member Bonnici said the euro level is an issue to take into account and that negative rates remain a possibility.

At this point, the ECB will need to unleash some genuine threats of rate moves to get the market's attention, rather than vague musings.

Larger moves came in cable and NZD/USD as both broke to fresh recent highs. USD/CAD also continued down to 1.0859. The pair has fallen in 11 of the past 14 sessions and the once-crowded long trade has cleared out.

The Australian dollar will be the focus in the hours ahead. It came within a pip of 0.9400 after the FOMC minutes but apprehension about the jobs report halted the move. Last month's outsized 47.3K job gain sparked the recent rally in the pair and this time expectations are for a modest 2.5K gain. The report is due at 0230 GMT.

Other data on the schedule includes Japanese machine orders at 0050 GMT and Australian consumer inflation expectations at 0200 GMT but neither is likely to move markets.