IRRATIONAL EXUBERANCE - No real surprises from the Fed Minutes and the markets were happy with the news, to open yet another rally in risk assets. Equities were higher, while the USD was broadly lower. I don't believe this is a trend that can persist, and will be looking for a reversal back the other way in the sessions ahead. Investors were very quick to dismiss concern from the Fed over complacency and I was rather surprised by this. Even expressed Fed concern over complacency did nothing to jolt the market's complacency. The Fed is clearly outlining its path for policy reversal and the markets don't seem to care as they still believe any reversal or move towards higher rates is still way off in the future. But it is important to remember that these latest Minutes did not have the benefit of considering the recent US NFP data.
KIWI BACK TO POST FLOAT HIGHS - On the currency side, it was Kiwi that was the big disappointment from my end, with the higher yielding commodity currency rallying to fresh yearly highs and trading just shy of the post float 2011 peak at 0.8840. While the RBNZ has been leaning towards the hawkish side, I have been baffled with the currency's relative outperformance given notable weakness from cyclical highs in both the Australian and Canadian Dollars. It is not in the best interests of the New Zealand economy to hold such a strong currency and the RBNZ has been quite vocal over its displeasure with the Kiwi strength. But in my view, the central bank hasn't taken this rally seriously enough, and they have been far too laissez fair in their approach. We now need to see a NZD/USD close back below 0.8780 to take the pressure off.