Currency Update: The #AUD has retreated from the 95 cent level of yesterday as financial markets absorbed the impact of the previous day’s action by the US #FederalReserve not to reduce their bond buying program. Australia: With equity markets in many countries touching five year highs after the US Federal Reserve’s decision to not taper their bond buying program, the sell-off in the #USD abated as analysts reassessed their views on the future policy direction of the US Federal Reserve. With Fed Chairman Bernanke saying there is no fixed timetable to reduce asset purchases and refraining from saying as he did after the June FOMC meeting that the asset purchases would stop once the unemployment level reduced to 7%, most analysts now anticipate that the first interest rate hike will now occur in June 2015 rather than March 2015. With longer term interest rates having increased substantially in the last several months and the level of refinancings of home mortgages falling away significantly, the US Fed did not want to end their stimulus program too early. With many EM currencies under pressure with the flight to the USD occurring in the last several months, this trend was reversed yesterday. The AUD and NZD were the main beneficiaries of the Fed’s action although some retreat was likely given the strong rise of yesterday. #RBA board member Edwards commented yesterday that the AUD was still too high which has again sparked the opinion that there may be another local decrease in interest rates on the horizon after most analysts had thought the easing cycle locally had come to an end. We expect a quiet day of trading locally as the markets absorb the implications of the US Fed’s action. Chinese markets are again closed for a holiday. Majors: In the US last night, the Philadelphia Federal Reserve district’s business survey was very strong with the index rising to 22.3 in August from an expected level of 10.3. Existing home sales in US rose 1.7% in August which was lower than the 2.6% rise expected but yoy they are up 13.2%. Weekly jobless claims rose slightly to 309k from 294k last week as two states last week had reporting issues. In the UK, retail sales for August fell 1% which was unexpected and is the largest fall in 10 months and this weakened the GBP overnight. In New Zealand, their GDP in Q2 rose 0.2% and 2.5% for the last 12 months. It is expected that in Q1 of 2014 the Reserve Bank of NZ will begin raising interest rates. Most analysts believe the NZD will continue to advance in the near future. There is still NZD8.1bn of reinsurance claims due to be received in the next few quarters related to the Christchurch earthquakes. Tonight in the US there are several speeches by US Federal Reserve board members. Their comments will probably be a bit of an anti-climax to the events of yesterday Today’s Forecast Range: USD 0.9425 – 0.9525
Posted on: Fri, 20 Sep 2013 00:08:08 +0000
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