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 has surged overnight after the FOMC minutes flagged concerns about the
weakening Chinese economy.

Australia: After softening back below the 0.7200 level yesterday, the AUD rallied almost 1 cent against the USD overnight, touching a high around 0.7270 following the FOMC minutes. Most of these gains have been held on to despite an initial retracement, with the AUD currently trading around 0.7250. The AUD (and NZD) were two of the best performers overnight as
the USD is weaker against the risk currencies, with the aussie touching a 3 week high, also helped by a rally in iron ore markets after China returned from a week long break. Australian home loans (August) is the only significant piece of data coming out today. Headline owner occupied lending volumes are expected to have risen 6%, counter to the general trend of softer demand with this expected rise to be analysed to see whether it reflects simply greater refinancing activity or signs of a genuine pickup demand for housing finance from owner occupiers.

Majors: Central banks were in focus last night, with news out of the Fed, ECB and BoE. The tone from the FOMC Minutes was slightly more dovish, although this wasn’t too surprising. Overall, the FOMC still see risks to the downside for US real GDP and inflation forecasts, with recent global growth and financial market developments exacerbating these downside risks. The Minutes also noted that low productivity and inflation growth was contributing to disappointing wages growth. The USD was broadly weaker against risk assets. The EUR was up to a 2½ week high as the ECB’s Minutes also reaffirmed that the Governing Council continue to see risks to euro area growth and inflation skewed to the downside, and that the Bank will be prepared to act further if required. The BoE left rates steady as entirely expected, the voting remained at 8-1, GBP pulled back on a dovish outlook for delayed lift-off from the BoE, but much of this was retracing a rally into the meeting, sterling holding up overall. Tonight is quiet on the data front but sees more Fed speak, with Fed presidents Lockhart and Evans (both voting members) speaking.

Economic Calendar 09 OCT

  • US Fed Lockart Speech New York
  • AU Owner Occupied Loans Aug
  • UK Trade Balance Sep
  • CA Unemployment Rate Sep

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