Aussie stocks rally to a new record on BHP and Rio Tinto rumors

- Forex: The USD traded in tight ranges against the European currencies but gained more than 0.15% against the CAD on weak Canadian Housing Starts data. The USD remained well supported ahead of the Fed meeting, with many suggesting we could see USD buying if the market perceives the Fed as not being dovish. Some analysts suggest that the changes made by the Fed in March have a long enough shelf-life, and that there is no need to change the Fed statement (given that no major changes have occurred in the economic landscape). EUR/JPY traded down 0.2%, as traders reduced long EUR positions ahead of the ECB meeting. Given the extreme long EUR positions against the USD and JPY, many analysts expect more EUR weakness ahead of the ECB meeting. The NZD/USD was lower by 0.3% after RBNZ governor Bollard said that New Zealand house prices "aren't bulletproof". Some have suggested that the RBNZ can afford to hike rates due to the resilience of the local housing market, but Bollard downplayed the validity of this idea. His comments were decidedly less hawkish than comments he made at the start of March (when he said that the RBNZ has options to hike rates further). (Note that all currency quotes relate to trading since 17:00 ET)

- Equities: The Nikkei225 is currently little changed as traders turned cautious ahead of tomorrow's FOMC policy statement and an upcoming speech by BoJ governor Fukui (Japanese 2-yr yields hit a 10-month high ahead of his speech). Declines in automakers were offset by M&A speculation driven gains in Japanese steel-makers. The Kospi is little changed as profit-taking in shares of Hyundai Heavy offset gains in shares of Posco Steel. The ASX200 index was in negative territory for most of the session but later rose to a new all-time high as shares of Rio Tinto gained. Rio Tinto gained more than 6.0% on a rumor that BHP may acquire the company at A$110/share. Other winners down under included retailers, gaining on the country's budget plans and bullish results from David Jones. Chinese equities are currently in positive territory and looks set for another record close. The Hang Seng index is tracking Chinese shares higher on gains in property shares.

- JPY firms during Asia on a combination of factors: Since 17:00 ET the JPY gained 0.20% against the USD, 0.17% against the EUR and 0.15% against the GBP. Many traders suggested the JPY gained on some unwinding of carry trades ahead of the Fed statement, but other said traders were taking profits from JPY short positions built up during Japan's Golden Week holidays last week. The JPY could benefit from short covering in the coming sessions, as recent positioning data shows that JPY shorts against USD reached the highest level since Feb 13.

- Markets ignore mixed Aussie house price data as focus remains on jobs data at the end of the week: (AU Q1 HOUSE PRICE INDEX QOQ: 1.1% V 1.2% expected; YOY: 8.6% V 8.1% expected; Prior QoQ revised to 1.1% from 0.9%; Prior YoY revised to 8.8% from 8.9%) Many analysts suggest that there is certainly a bias towards a better-than-expected jobs number at the end of the week, and this is likely to support the AUD in coming sessions. Aussie job advertisements placed in newspapers and online last month rose 3.5% to a record 228,445, while the NAB business confidence survey hit a one year high in April.

- Commodities: Crude oil is currently little changed ahead of tomorrow's U.S. weekly inventory data. News of more kidnappings in Nigeria failed to inspire gains in crude oil prices. Spot gold is little changed on cautious USD trading. Shanghai copper is higher for the 3rd consecutive session on slightly better than expected U.S. March wholesale inventories data.