Bell FX Currency Outlook: Fed minutes indicate a likely tapering in coming months.

Australia: The politics around the Government’s proposal to lift the debt ceiling to AUD500bn continued with the Opposition parties only agreeing to lift the ceiling to AUD400bn in the short term.

This was after Treasury Secretary Martin Parkinson confirmed that Treasury had advised the Government that lifting the debt ceiling above AUD430bn (to a proposed AUD500bn from a current AUD300bn) would be prudent as peak debt will rise above this level during the four year forward estimates period and a buffer of AUD40-60bn is necessary.

The AUD has given back some territory, trading in the lower 0.9300s in early post-Minutes trade, lower by ½ a cent over the course of the ight.

Majors: The Fed Minutes record extensive discussion about the medium term outlook for monetary policy, including the Fed’s communication of its policy outlook, a subject the Chairman discussed at some length in his speech Washington yesterday.

Still of course data dependent, but tapering expectations look only to have been delayed somewhat, with perhaps the Fed only one or two good payroll numbers away from beginning to reduce its asset purchases.

These Minutes should provide some support for the USD and Treasury bond yields that have had an interesting night. The overnight release of broadly in-line retail sales for October (core sales rose 0.4% but were revised down one tenth, offsetting each other) and still very low CPI (headline 1.0%; core 1.7%, both unchanged) causing the USD to lose some ground before retracing to reach new intra-day highs into the Minutes.

An “as expected” existing home sales report was some relief and did provide some support. A wire report signaling possibly negative ECB rates for banks’ excess cash also weighed on the EUR., with the USD stronger overall.
Economic Calendar
21 NOV CH HSBC / Markit Flash Mfg PMI
AU RBA Governor Glenn Stevens speaks at ABE Conference:
"The Australian Dollar: Thirty Years of Floating"
US Initial Jobless Claims

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