Australian Dollar Outlook - March 13, 2015

By @chelean on
Australian one dollar coins surround a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Australian consumer prices rose by more than expected last quarter while underlying inflation proved alarmingly high, reviving pressure f
Australian one dollar coins surround a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Australian consumer prices rose by more than expected last quarter while underlying inflation proved alarmingly high, reviving pressure for an increase in interest rates and lifting the local dollar to a 29-year peak. Reuters/Tim Wimborne

Bell FX Currency Outlook: The Australian Dollar is firmer after an unexpected dip in US retail sales caused a strong partial reversal of the past week’s USD surge.

Australia: The AUD was trading at USD 0.7700, a full US cent higher than 24 hours ago. The US Dollar Index reached a century, trading at 100.06 before the correction. This volatility is being driven by the Fed and US interest rates. Expect this sort of volatility in the USD to keep occurring as the world edges closer to the Fed announcing an increase in the Fed Funds Rate, with key moments being the FOMC meetings and US labour market reports. Looking at the AUD, it rallied through USD 0.7700 during the early hours of Friday morning after new data showed that US retail sales fell by 0.6% in February, marking the third straight month of decline. It was a disappointing result, relative to expectations from economists of a 0.3% rise. Freezing temperatures and snowstorms were blamed for the poor February result. The other slight fillip for the AUD was February’s unemployment result, which was slightly better than expected, and for some, it appears that unemployment may be tentatively levelling out near 6.3%, which if sustained would be lower than expected.

Majors: The above-mentioned weakness from US retail sales saw the USD retreated from its strongest level in twelve years on profit taking. GBP underperformed after comments from BoE Governor Carney intimated the appreciation of the GBP against the EUR and weak global inflationary pressure could delay interest rate hikes. Core Euro Zone area sovereign bonds rose slightly through the London session but remained very close to record levels. Peripheral bond yields, however, continued to decline. US Treasuries also rallied, with initial moves extended following the disappointing US retail sales report. Tonight, Canada’s employment report may be interesting, with the Bank of Canada having stepped toward a neutral bias, rather than easing. All eyes will be the first read of the US University of Michigan consumer confidence survey. This measure edged off cyclical highs in February, but remains near decade-highs. That said, markets will largely be focussing on next Thursday morning’s FOMC decision, with the USD expected to remain bid.

Economic Calendar 13 MAR

  • JN Industrial Production MoM Jan
  • CA Unemplyment Rate Feb
  • US PPI Final Demand MoM/YoY Feb
  • US U.of Mich Consumer Sentiment Mar

 

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