Australian dollar notes and coins can be seen in a cash register at a store in Sydney, Australia, February 11, 2016.
Australian dollar notes and coins can be seen in a cash register at a store in Sydney, Australia, February 11, 2016. Reuters/David Gray

Bell FX Currency Outlook: The Australian Dollar has rebounded slightly on news of the US Federal Reserve’s caution about raising interest rates.

Australia: This morning the AUD is trading at USD 0.7600, which is half a US cent higher than yesterday. Minutes of the US central bank’s March monetary policy meeting, released early on Thursday morning (AEST), revealed that despite signs of positive momentum in the US economy, the board remained cautious about raising rates due to global economic uncertainty. The USD was weak against the JPY as the market concluded that BoJ willingness to drive JPY weakness is over and as the US Fed highlighted its fears of policy asymmetry. Together with a strong move in oil, this helped the AUD and NZD follow ‘risk’ higher. The USD trend will likely remain mixed. A light data day will mean that central banks are closely watched with an RBNZ speech, ECB Minutes, and the BoJ reaction to the stronger JPY.

Majors: The US Fed Minutes from the 15-16 March meeting pointed to a lack of consensus on the timing of rate rises and the durability of the recent increase in inflation. The main argument for rises are extremely low interest rates are causing a misallocation of resources across both assets. Also, delaying the inevitable could make matters worse. The main arguments against rises include markets are fragile whilst international growth remains sluggish. Also, that the US economy is in no fit state to handle a rampant USD. Lastly, consensus abounds that inflation expectations remain low. June remains a reasonable time for the next move up in rates, and the data recently has been encouraging. However, today’s Fed Minutes affirm that contrary messages from FOMC members are likely to continue to provide the market with swings and roundabouts over the months ahead.

Economic Calendar 07 APR

  • AU AiG Performance of Construction Index Mar
  • JN BoJ’s Kuroda speaks
  • EU ECB Meeting Minutes Mar
  • US Initial Jobless Claims Apr 2

Bell Fx

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