Australian Dollar Outlook - 20 February 2014

U.S. one-hundred dollar bills are seen in this photo illustration at a bank in Seoul August 2, 2013. Picture taken August 2, 2013. Reuters

Bell FX Currency Outlook: The Australian Dollar traded over .9000 again overnight before the release of the minutes from the most recent FOMC meeting which occurred late on Wednesday US time.

Australia: The AUD has softened slightly after the US Federal Reserve indicated they were optimistic that the US economy would continue to recover and they saw no reason to deviate from their continued path of reducing the stimulus through lesser bond purchases each month. Only a deviation in growth or a change in inflation would see them change their current path. The AUD came off its highs during the overnight session when the minutes were released. In Australia yesterday our wage price growth figures were in line with estimates rising 0.7% qoq and were 2.6% yoy which is the weakest since 1999. Today in Australia the RBA will give us the details of their FX transactions last month and at 12:45 pm AEDT we will see the HSBC/Markit flash manufacturing PMI data where the market expects a figure very similar to last months of 49.5. If it was to be higher we would expect the AUD to react and move higher on the day. A
much lower figure would see the AUD retreat. With the general FX market generally short the AUD, a higher PMI figure might force some of those sellers out of the market pushing our local currency higher.

Majors: The US Fed also noted in their minutes that as unemployment reduced toward 6.5% they would provide further guidance on the future path of interest rates. This also gave some support to the USD and some analysts may start to alter their predictions of when the cash rates in the US might start to rise. Generally no change is expected until the middle of 2015. Housing starts in the US in January were much softer and down 16% but most of this was due to severe weather. From the UK labour reports were slightly softer than expected with their unemployment rate for the three months through December rising 0.1% from 7.1% to 7.2%. Although a bit disappointing the level is down from 7.8% early last year.

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