- The Australian dollar hit a fresh six-week high on Thursday against the greenback before easing in late trade.
- The US dollar strengthened following the release of the US Federal Reserve’s November monetary policy statement. It left rates unchanged, as expected, and offered few major surprises in its commentary.
- The RBA will release its quarterly Statement on Monetary Policy (SoMP) today, including updated economic forecasts. The forecast changes have been well flagged by the bank meaning the release may not generate much intraday volatility. Housing finance data for September will also be released. Almost all Australian housing data has been weak of late.
The Australian dollar is weaker in late trade on Thursday, giving back earlier gains as the US dollar strengthened.
However, as seen in the scoreboard below at 8am in Sydney on Friday, it managed to climb against most of the major crosses, continuing the form seen on Wednesday.
AUD/USD 0.7254 , -0.002 , -0.27%
AUD/JPY 82.68 , 0.11 , 0.13%
AUD/CNH 5.0311 , -0.0007 , -0.01%
AUD/EUR 0.6385 , 0.002 , 0.31%
AUD/GBP 0.5553 , 0.0012 , 0.22%
AUD/NZD 1.0747 , 0.0036 , 0.34%
AUD/CAD 0.9547 , 0.0008 , 0.08%
After opening the session at .7274, the AUD/USD climbed to as high as .7302 — the highest level in six weeks — as traders continued to test the resolve of sellers above the figure.
However, as was the case on Wednesday, the it couldn’t managed to break convincingly higher, seeing it ease lower in the latter parts of trade against the greenback.
While there were no major surprises in the US Federal Reserve’s November monetary policy statement, the US dollar rallied following its release as the FOMC officials gave a strong signal that the fed funds rate was likely to increase again when it next meets in December.
“The US dollar has been choppy since the release of the FOMC statement,” said David de Garis, Economist at the National Australia Bank.
“It dipped initially as the little-changed statement did call out that growth in business fixed investment has moderated from its rapid pace earlier this year, but just as quickly the USD reversed course higher.
“The statement also noted that the unemployment rate had ‘declined’, previously describing it as having ‘stayed low’.”
More broadly, de Garis says the tone of the statement is a “half-nod to market pricing expecting a further increase in the Fed funds rate at its December 18-19 meeting”.
While the late burst of US dollar pushed the Aussie lower, it managed to climb against all of the major crosses except the offshore traded yuan.
Better-than-expected Chinese trade data for October was one factor cited to explain the Aussie’s resilient performance.
Turning to the day ahead, the main area of focus in Australia will be on the release of the Reserve Bank of Australia’s (RBA) quarterly Statement on Monetary Policy (SoMP), including updated economic forecasts.
Based on the commentary offered by RBA Governor Lowe earlier this week, the bank’s forecasts for GDP growth this year and next will be revised up to 3.5% while unemployment will fall to 4.75% in 2020, down from 5% seen previously.
The bank’s key inflation forecasts may also be revised slightly higher in 2020, possibly to the midpoint of the RBA’s 2-3% inflation target.
Given these changes have been well flagged by the bank, most interest will be on why it now expects GDP growth to be stronger in the period ahead. It’s commentary on the housing and labour markets, in particular, will receive a lot of attention.
The SoMP will be released at 11.30am AEDT.
Coming alongside the SoMP, the ABS will also release housing finance figures for September. This too will be create some interest given how weak housing market indicators have been of late.
Outside of Australia, the other highlights today include inflation data from China, Q3 GDP and trade figures from the UK along with producer price inflation, wholesale inventories and consumer sentiment from the United States.
Couere of the ECB and Quarles from the Fed will also be in action.
There’s also plenty of speculation doing the rounds surrounding Brexit negotiations, meaning the big mover today could well be the British pound.