AUD news - page 15
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AUD/USD Weekly Forecast December 12-16
Commodity currencies showed resilience in the past week as a broader recovery in the Greenback failed to have much impact. AUD/USD traded within a range and ended the week out relatively unchanged. The pair has been recovering since late November and the weekly doji print negates some of the upside momentum. The sharp two-week decline following the US election has a bearish tone for the pair, and there is some potential for a continuation lower in the week ahead.The Reserve Bank of Australia kept rates unchanged in the past week and delivered a statement with positive remarks regarding inflation. A weak quarterly CPI reading earlier this year was the catalyst for an easing cycle and following two rate cuts, the central bank has taken a more neutral stance. In the latest statement, the bank indicated that inflation has been more balanced globally, creating an optimistic domestic outlook. Concerns remain in the housing market as a clear signal for a slowdown has been lacking. There were also concerns in the labor market with part-time employment attributing to the bulk of gains in the sector this year. In the upcoming week, the latest labor figures will be released from Australia on Monday, and it will be important to distinguish whether gains are derived from part-time or full-time income.
Some cause for concern over a recession arose in the past week with weak growth numbers out of Australia. The September quarter GDP contracted 0.5% versus an expected rise of 0.2%. If Australia were to fall into a recession, it would be the first in 25 years.
The European Central Bank was the biggest driver for the Dollar in the past week as the ECB extended its bond purchase program to December 2017 from the prior expiry date of March 2017. While the QE program continues beyond March at a reduced amount, the net annual easing commitment for 2017 is substantially higher, causing a surge in the Greenback.
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Australia data - October credit card purchases $A25.6bn & balances for October
Australian spending on credit cards data
Australia - Q3 house price index: +1.5% q/q (expected +2.5%, previous +2.0%)
Q3 house prices
Australia - Westpac Consumer Confidence (Dec.): -3.9% m/m (prior -1.1%)
December consumer confidence from Westpac
Australian (November) Employment Change: +39.1K (expected +17.5K)
Australian employment report for November
AUD/USD Trendline Break Amplifies Bearish Sentiment
AUD/USD turned lower on the back of a more hawkish than expected Fed meeting on Wednesday. A rising trendline that had been holding the pair higher in the recovery from November 21 lows was breached to increase the bearish outlook and signal a continuation of the predominant downtrend triggered by the US elections. The US Dollar continued to dominate and has outperformed all of its major counterparts for a second consecutive day.
Positive Australian data failed to negate prevailing Dollar strength and a relief rally was short-lived. The latest labor figures were released in the Asian session and pointed to strength with a rise of 39,100 people gaining employment versus the analyst consensus for a rise of 17,600. The more important takeaway from the data was that employment gains derived from full-time employment while the majority of gains reported this year had come from part-time employment. The unemployment rate ticked up to 5.7% versus an expected and prior 5.6%, attributed to an increase in workforce participation.
AUD/USD bounced from a support confluence following the data as a horizontal level at 0.7382 and a rising channel from November 23 lows held the pair higher. Gains were not sustained and a break below the support confluence in European trading signaled a continuation lower.
An upward revision in rate hike expectations for 2017 by the Federal Reserve caught markets off guard and the Dollar continued to rally today following a decisive break of strong resistance at 101.80 in the trade-weighted index (DXY) on Wednesday. In a continuation higher, the index is seen trading at the next level of upside resistance that falls in a zone between 102.91 and 103.54. The level at 102.91 reflects monthly resistance from mid-1989 and mid-1999. The horizontal level at 103.54 marks a spike low from July 2002 and a turn lower was triggered a few points ahead of the level. DXY was last seen trading at 103.16 for a gain of 0.94%
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Westpac Forecasts The Australian Dollar To Gradually Drop To USD 0.68 By 2018
The Australian US Dollar exchange rate could slowly fall towards 0.68 over the course of 2017 according to the latest studies by FX strategists at Westpac.
We are at the end of an exciting 2016, and are making a positive entry into 2017, probably one of the best in the last few years.
We analyze Westpac’s Australian dollar forecast for the next year.
The results of the US Presidential elections has stoked a strong ‘risk on’ trade, ‘franked’ by a Fed rate hike.
The global rate cycle has turned led by the US dollar.
Expectations from the Fed and RBA
The USD skyrocketed post the election of Donald Trump, supported by expectations of tax cuts and substantial fiscal stimulus.
The USD spiked another leg higher fuelled by the US Federal Reserve’s rate hike in December and around a 100% probability of at least two rate hikes to 1.125% by end 2017.
On the other hand, led by a strong employment report and the developments in the US, the markets have priced out any further rate cut in Australia and have priced in a 100% probability of a rate hike by mid-2018.
“By end 2018 the Federal funds rate will marginally exceed Australia’s overnight cash rate (1.625% vs 1.5%),” said Bill Evans, chief economist at Westpac.
“Our call for steady rates in Australia in both 2017 and 2018 implies that by end 2017 the short term yield differential between US and Australia will have contracted to 0.375% with undoubted negative implications for the AUD,” said Evans.
Australian Dollar Forecast
Evans forecasts the AUD to gradually fall from USD 0.75 to USD 0.72 next year, however, the correction doesn’t end there.
By 2018, the analysts at Westpac forecast the AUD to reach the lows of USD 0.68.
However, in the near-term, the rally in the commodity prices is likely to continue on the back of a resilient Chinese demand and a slow supply response.
For iron ore, Evans has raised the price from $69/t to $77/t for March 2017 and the year to end at $57/t against an earlier forecast of $45/t.
Similarly, coking coal prices have also been raised from $170/t to $290/t for June next year and the year-end target for 2017 is $140/t against an earlier forecast of $95/t.
Following the November 2017 Congress, Chinese growth is likely to slowdown, which will push iron ore prices “back around $45/t and coking coal to $84/t.”
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Australia: Fin Min suggests budget review will show deterioration in bottom line
The government's Mid-year Economic and Fiscal Outlook is due on Monday 19 December 2016 (Australia time)
AUD/USD Weekly Forecast: US Dollar Trends Will Dominate
Underlying trends in the US dollar will tend to dominate AUD/USD moves over the week ahead with developments surrounding risk appetite also important. Chinese trends could have a notable importance if confidence in Chinese markets stumbles and the yuan declines sharply. Overall, AUD/USD will tend to remain under pressure unless there is a significant US correction weaker with the risk of a slide to test June lows below 0.7200.
US dollar trends will tend to dominate sentiment in the short term following a fresh surge in US currency following the Federal Reserve rate increase. The US currency pushed sharply higher across the board, primarily due to the projections from FOMC members that there would be three rate increases in 2017.
From around 0.7500 ahead of the decision, there was a slide to lows just below 0.7300 on Friday, the weakest level since early June.
If the dollar maintains a very strong tone in global market, there will be very little chance of a sustained rally in the Australian dollar, while a correction in the US currency would increase the potential for a corrective Australian currency.
The US data releases are unlikely to have a major impact, although a strong reading for durable goods orders would help underpin confidence in the US economy and also support the US currency.
Comments from Fed Chair Yellen will be watched very closely on Monday to see there is any attempt to push back against the market’s hawkish interpretation of the Fed rate projections. Any dovish rhetoric from Yellen would increase the potential for an Australian dollar correction stronger.
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Moody's says Australia's budget update in line with AAA ratings, stable outlook
Via Reuters