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 is higher after the US Federal Reserve indicated it expected mild growth.

Australia: The AUD is trading above USD 0.7500 as markets grapple with diminished odds of a June rate rise in the US. It now appears that given last night’s message from the Fed, along with dovish signals from the Bank of Japan and the European Central Bank, the AUD may see further strength. The Fed surprised markets on the dovish side, remaining concerned with the global environment. The GDP forecasts for 2016 were revised lower on global growth risks and tepid business investment. While oil has provided a downward shock to headline inflation, the moreimportant core inflation forecasts were unchanged for 2016, in line with recent data. Unemployment forecasts were also revised down, completing a rather mixed picture. The market generally liked the “low for longer” message (at least initially). Locally today, we have labour data. Unemployment is predicted to be steady for the February labour force report. Employment is expected to have increased by 18k, which would imply slower employment growth in Q1 (reflecting an element of adjustment after the Q4 results). Overall, most indicators continue to signal healthy underlying employment growth in the near term and an unemployment rate likely to stabilise around the 5¾-6% mark this year, given reduced stimulus from housing and the lower AUD. RBA assistant governor for financial markets Guy Debelle is due to deliver a speech at the FX Week Australia conference in Sydney on Thursday morning.

Majors: Prior to the Fed announcement markets had a quieter night. European equities were mixed although the UK FTSE 100 received a small boost after a mildly expansionary 2016-17 UK budget was presented. US equity markets lost ground as they awaited the Fed, before bouncing sharply to close higher following the Fed meeting. In bond markets, there was a mild but generally broad-based rally on euro area sovereign bonds. In contrast, US Treasuries initially sold off, but rallied sharply following the Fed’s dovish tone. Oil prices bounced, and gold jumped in response to the weaker USD. The weaker USD should provide some support for commodity markets today.

Economic Calendar 17 MAR

  • JN Trade Balance Feb
  • AU Unemployment Rate/Employment Change Feb
  • UK BoE Interest Rate Decision Mar
  • US Philadelphia Fed Manufacturing Survey Mar

Bell Fx

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