Australian dollar coin
A one Australian dollar coin is seen in this picture illustration taken in Sydney, Australia, July 29, 2015. Reuters/David Gray

Bell FX Currency Outlook: The Australian Dollar is trading lower this morning leading into the Easter break.

Australia: The USD found more support overnight on the back of comments from the Fed. This USD support was aided by a lowering in risk appetite and a move in commodity prices. The AUD was the leader in the retracement and fell over 1%. Liquidity is expected to be thin in the run-up to Easter, highlighting the risk of the currency gapping lower if this sentiment is maintained. Expect some support at the psychological USD 0.7500 level today. The Reserve Bank of Australia is looking more likely to maintain the cash rate at 2.0% this year and next, having previously forecast cuts. Data on the Australian economy has been somewhat better of late, particularly in regard to the labour market, but also with business surveys suggesting the recovery in non-mining activity is gaining traction. The Australian domestic economy is likely to continue to have a ‘slow grind’ recovery, as retail sales have softened, housing activity, while still solid, is unlikely to be a significant contributor to growth this year, and the outlook for non-mining investment remains soft. There are no major data releases. The ABS will release the quarterly detailed labour force statistics, including employment by industry.

Majors: Looking at the majors, expect a relatively quiet session for currencies in the run up to Easter. Thin liquidity, however, increases the risk of currency pairs gapping. WTI crude oil prices fell on a large rise in US stockpiles and weekly crude oil imports. Equities seem to be losing some momentum. St Louis Fed President James Bullard presented a more upbeat assessment of the US economy and thoughts on policy (in contrast to Fed Chair Yellen’s more dovish tone last week). He said that a case could be made for an interest rate hike by the Fed in April should another strong payrolls report be released as he thinks inflation expectations have recovered to now be “moving in the right direction”. Bullard believes the Fed could overshoot on its inflation and full employment targets given that “the odds that we will fall somewhat behind the curve have increased modestly”. Expect a relatively quiet session for currencies in the run up to Easter.

Economic Calendar 24 MAR

  • NZ Imports/Exports/Trade Balance Feb
  • EU Economic Bulletin Mar
  • UK Retail Sales Feb
  • US Durable Goods Orders Feb

Bell Fx

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