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 AUD is trading a bit lower this morning as Fed speakers reiterated June is “live” and that data is getting within range of where the FOMC may be poised to proceed with interest rate normalisation.

Australia: The batting line up of FOMC speakers on said topic of normalisation in US interest rates continued overnight. San Francisco’s Williams (non-voter 2016) said “I don’t know what we’ll do in June” but he was pretty much alone, the gist of policy is getting clearer each week it seems. Essentially, the feeling is the economy is building as he and others on the committee had expected (hoped maybe) and is broadly in line with the forward guidance communicated in the March Summary of Economic Projections. Locally, ANZ-Roy Morgan Australian Consumer confidence is released at 9:30am RBA Governor Glenn Stevens is giving a speech that will be the main driver today. EU finance ministers are meeting, with Greece on the agenda, whilst BoE officials are presenting to parliament. A speech by Philadelphia Fed President Harker (2017 Fed voter) is due at 8:30am AEST.

Majors: Looking at the Majors, the US interest curve flattened with yields higher at the front end after comments from Fed speakers. The Fed rhetoric has sent the odds of a June rate hike move from less than 5% a fortnight ago to 32%, with a July hike 54% priced in. The comments from FOMC members Dudley, Kaplan, Williams, Lockhart, George, and Lacker have reiterated June is live. Recent data does suggest the market has a more sound basis to expect a hike over the next few months. US inflation readings have been trending up (albeit modestly), and the US labour market is strengthening, with 2016 jobs growth averaging a shade below 200k per month. The US economy also looks to be rebounding solidly in Q2, although still-sluggish manufacturing sentiment suggests not all of the economy is firing. The key stumbling blocks for the Fed still look to be the global scene as well as how well financial markets deal with higher US rates. Bottom line, the Fed is likely to move carefully and slowly.

Economic Calendar 24 MAY

  • AU RBA Governor Stevens speaks in Sydney
  • GE ZEW Survey Current Situation/Expectations May
  • US Richmond Fed Manufacturing Index May
  • US New Home Sales Apr

Bell Fx

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