Australian one dollar coins
A handful of Australian one dollar coins is shown in Sydney, February 18, 2004. Reuters/Tim Wimborne

Bell FX Currency Outlook: The Australian Dollar has weakened despite Wall Street extending gains on rising oil prices and the increasing likelihood of an interest rate rise in the US as early as this northern summer.

Australia: Equities continued their advance as FOMC members again reiterated more hawkish rhetoric. Oil continued to climb higher overnight amid a government report showing US crude inventories and production have declined while iron ore continues to trend lower. Locally, the Q1 CAPEX survey is released today at 11:30am AEST with the focus on investment intentions for 2016-17. The market expects a mild upgrade to non-mining firms’ investment plans, given the more positive business environment over recent months. This is despite the mining outlook remaining weak. In New Zealand, the Budget is released.

Majors: In the Majors, we look at the FOMC. It was the turn for Philadelphia Fed President Harker, as he reiterated it is time to normalise policy, with the US economy continuing to grow and inflation on the rise. He mooted that 2-3 hikes are possible this year. Even though markets took the comments in their stride, there’s been a big adjustment, with odds of a June hike now sitting around 34% vs 4% just ten days ago. Intriguing when one bears in mind the PBOC is guiding the RMB weaker (again) and inflation data later this week in Japan will likely show the need for the BoJ to ease once more. European stock markets are riding high on the better risk climate and are also benefiting from a reasonably settled economic backdrop, whilst getting an extra kicker from the weaker tone to EUR/USD. The GBP had a good day as Brexit fears continue to subside. The Bank of Canada left interest rates unchanged and said that the current stance of monetary policy was appropriate, noting that the risks around inflation were “balanced”. A final word on Greece – an encouraging development is the agreement with the Eurogroup, in principle, to extend Greece’s EUR 11bn bailout money and in a general development, there seems a more settled euro area economic climate compared to not that long ago.

Economic Calendar 26 MAY

  • AU Private Capital Expenditure (Capex) Q1
  • NZ Government Budget
  • UK GDP Q1
  • US Durable Goods Orders Apr

Bell Fx

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