Talking Points:

Aussie, NZ Dollars Sink as Yemen Turmoil Drives Risk Aversion
US Dollar at Risk if Fed-Speak Underpins Rate Hike Delay Bets
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The Australian and New Zealand Dollars underperformed in overnight trade, falling as much as 0.5 and 0.3 percent on average against their leading counterparts. A drop on Asian stock exchanges appeared to be the catalyst behind the slide in the sentiment-linked currencies.

The MSCI Asia Pacific regional benchmark equity index fell more than 1 percent as crude oil surged amid supply disruption fears. The move followed reports that Saudi Arabia began military operations in Yemen. The country sits on the Gulf of Aden, a key transit hub for petroleum from the Persian Gulf.

A quiet economic calendar in European trading hours will probably allow sentiment trends to remain in the driver’s seat. S&P 500 index futures are trading relatively flat in late Asian hours however, hinting that risk aversion may not necessarily carry forward into the session ahead.

Later in the day, “Fed-speak” returns to the spotlight.Comments from James Bullard and Dennis Lockhart, Presidents of the US central bank’s St Louis and Atlanta branches respectively, are on tap. The latter is a voting member of the rate-setting FOMC committee this year.

Traders pushed out the likely timeline for the first post-QE rate interest hike after last week’s FOMC meeting, with Fed Funds futures now pointing to an increase in September (versus the June/July consensus prevailing ahead of the Fed announcement). Rhetoric supporting thisshift may weigh on the US Dollar.

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