- The Australian dollar surged higher overnight, logging the largest increase against the greenback in eight months.
- The rally was driven by US dollar weakness and sharply higher commodity prices.
- Australia’s February jobs report will be released today.
The Australian dollar ripped higher on Wednesday, fuelled by a sharply weaker greenback and stronger commodity prices.
Here’s the scoreboard as at 7.50am AEDT.
AUD/USD 0.7774 , 0.0092 , 1.20%
AUD/JPY 82.38 , 0.54 , 0.66%
AUD/CNH 4.8992 , 0.0343 , 0.71%
AUD/EUR 0.6298 , 0.0024 , 0.38%
AUD/GBP 0.5495 , 0.0007 , 0.13%
AUD/NZD 1.0741 , 0.0051 , 0.48%
AUD/CAD 1.0024 , -0.0017 , -0.17%
After falling to a three-month low below 77 cents a session earlier, the AUD/USD ripped higher in the latter parts of trade on Wednesday following the release of the US Federal Reserve’s March interest rate decision.
While the Fed lifted its funds rate to 1.5-1.75%, an outcome expected by markets, the reaction was entirely driven by the release of the Fed’s latest economic projections, especially its forecasts for the Fed funds rate in the years ahead.
The median FOMC member forecast for 2018 was left at three interest rate hikes, an outcome perceived as less-hawkish than markets were expecting.
The median forecasts for rate hikes in 2019 was upped from two to three while those for 2020 were also skewed higher, although not enough to change the median view.
As seen in this excellent chart posted by John Authers of the Financial Times, while the median fed fund rate projections for 2018 and 2020 were unchanged from prior forecasts, that masked a significant upward shift in many member forecasts.
The FOMC’s prior forecasts are on the left with the latest forecasts on the right.
The Fed also upped its forecasts for GDP growth, core PCE inflation and lowered its unemployment view, although that was not deemed enough to be perceived as hawkish my the markets.
The Aussie dollar was one currency to benefit, hitting a session high .7779 as Fed Chair Jerome Powell told reporters that recent data did not suggest an acceleration in US inflationary pressures.
It currently sits just below that level at .7774.
The Aussie also posted strong gains against all of the major crosses except for the Canadian dollar and British pound, the former benefiting from another huge rally in crude oil prices while the latter found support from a stronger-than-expected increase in UK wage pressures.
Turning to the day ahead, the big risk events continue to come thick-and-fast both in Australia and abroad.
Domestically, Australia will receive its February jobs report, including quarterly underemployment and underutilisation data, two key figures that are seen as influential on the outlook for wage pressures.
This 10-second guide has more on what to expect.
Outside of Australia, data highlights today include flash PMI prints from Japan, Europe and the US, German business sentiment along with UK retail sales.
The Bank of England will also hand down its March interest rate decision.
No change is expected meaning all interest will be on whether the bank signals that it’s considering lifting interest rates in May.