Bell FX Currency Outlook: The Australian Dollar traded to a fresh one-week low, following dovish comments by the Reserve Bank of Australia yesterday and offshore moves into the USD overnight.

Australia: Currently, the AUD is trading at around USD 0.9330 which is its weakest level since 9 June. In yesterday's minutes of its June board
meeting, the RBA said it was unclear how much the tough federal budget and expected declines in mining investment will impact the economy.

In addition, most currencies lost ground overnight with the US Dollar in favour ahead of a statement from the US Federal Reserve on Thursday
morning (Australian time) in which the Fed is expected to announce an upgrade to its economic forecasts.

Looking briefly at the RBA's minutes, it's worth noting in particular that the Bank noted "low interest rates were working to support demand, although it was difficult to judge the extent to which this would offset the expected substantial decline in mining investment and the effect of planned fiscal consolidation. Those uncertainties were likely to take some time to resolve."

This suggests the Bank will lean towards maintaining the expansionary policy setting until it is clear that growth is above trend and spare capacity in the economy is reducing. There is little on the domestic calendar today and the key event in offshore markets tonight is the FOMC policy meeting.

Majors: Looking at the majors, the broadly stronger-than-expected US inflation print brought the timing of US rate hikes back into focus and supported the USD ahead of the FOMC meeting tonight. Emerging market currencies bore the brunt of the selling once again, with high yielders in
the firing line.

As written, the FOMC meeting tonight is critical for the USD, with expectations the Fed's monthly asset purchases will be scaled back by a further USD10bn to USD35bn per month, the first hike in the Fed Funds Rate (FFR) remaining some way off and a modest downward revision to the previous GDP growth forecast range of 2.8-3.0% for 2014.
Economic Calendar
18 JUN US FOMC Rate Decision
US TAPERING: PURCHASE OF TRSY'S/MBS
UK BANK OF ENGLAND MINUTES

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