Forex daily analysis from FIBO Group

[FIBOgroup]

13.02.2015 - The Australian dollar headed for further losses

The Australian dollar has fallen significantly and is headed for further losses according to RBA governor Glenn Stevens.

Speaking before a parliamentary committee today Stevens noted that although the direction of the currency remains uncertain there are many factors working against it,
"It seems to me that the exchange rate is doing more or less what you would have expected it to do," he said

"Where it will go from here, nobody knows, these things are inherently unpredictable, but I can certainly think of reasons why it may go down some more."

On the topic of Interest rates and unemployment the governor sounded downbeat noting that tumbling commodity prices and sluggish growth forced the central bank to act by cutting interest rates,

“We need more growth,” the governor said. “I had hoped for more signs of intentions to invest and pick up employment by now but we came to the conclusion that the economy needed more help.”

Concerning the dangers of a real estate bubble the governor mentioned that there were some concerns but there were also other factors that needed addressing,

“Developments in the Sydney market remain concerning, but in the end we did not see these trends as overwhelming a case for a further easing in monetary policy that was made on more general grounds,” he noted,

To address the problem of a property crisis Stevens noted that it was up to the government to act to make the cost of new housing more affordable,

“The biggest enemy is the increase in housing values as the other 97% of the population bid up property values,”

“We need more innovative and flexible use of land so the cost of new housing comes down,” he said.

 

[FIBOgroup]

16.02.2015 - Australian dollar steady ahead of RBA minutes

The Australian dollar is sitting tight today due to a lack of economic news and awaiting tomorrows minutes meeting from the RBA.

At 12.30am (AEDT) the local currency was trading at US77.83c slightly lower from US77.83c on Friday.

With markets in the US closed today traders are choosing to sit on the sidelines for the all-important speech from the Australian central bank tomorrow.

The RBA unexpectedly cut rates a few weeks ago to 2.25% so tomorrow’s meeting will be eyed closely for any signs of a further rate cut.

The unemployment rate will be on the agenda with some like OM Financial senior client adviser Stuart Ive noting that the central bank stands ready to act if the job market deteriorates further
"The RBA stands willing to cut rates as the employment situation and the economy continue to stagger along," Mr Ive said.

Australia’s unemployment rate jumped from 6.1% to 6.4% from december through to January.

Bill Evans, Chief Economist at Westpac also noted there is a good chance that the RBA will cut rates again in March although the housing market may cause some concern,

“For now, we are comfortable to maintain our original call for a follow up move in March, particularly given the Bank’s comfort with its initiatives in the regulatory sphere. However we recognize that a perfectly respectable case can be made for the Bank to pause for a month or two to assess developments in the housing market.” he said.

“The most important point is that February is not the end of this rate cycle with another cut extremely likely over the next three months.”

“Consistent with our view that the interest rates are likely to move lower, and as suggested by the Statement on Monetary Policy, we expect the RBA to adopt an explicit easing bias.”

 

[FIBOgroup]

17.02.2015 - Australian dollar steady over concerns of housing bubble

The Australian dollar is trading slightly higher today after the RBA minutes meeting today where the central bank left the door open for further rate cuts, although not necessarily in March as a growing number of analysts had started to predict.

At 7.45pm (AEDT) the Aussie dollar was trading at US77.90c up from US77.84c in yesterday’s trade.

The RBA noted in today’s minutes meeting that they decided to cut interest rates to 2.25 per cent after a string of recent poor economic data.

Although the bank acknowledged that the latest interest rate cut had helped to push the Australian currency lower they mentioned they will be keeping a close eye on property prices, as any further easing of monetary policy may add fuel to the fire of an already sky high real estate market.

"Housing price inflation had moderated from the rapid rates seen in late 2013, but remained high and in Sydney and Melbourne had been well above the growth rate of household income," the RBA said.
The bank also noted there were some concerns over the amount of “Investor credit” compared to the level of “owner occupied housing credit”, and only time will tell whether moves from the Australian Prudential Regulation Authority would help curb this problem.

"Given the large increases in housing prices in some cities and ongoing strength in lending to investors in housing assets, members also agreed that developments in the housing market would bear careful monitoring," the RBA said.

“It would be important to assess the effects of the measures designed to reinforce sound residential mortgage lending practices announced by APRA in December."

 

[FIBOgroup]

18.02.2015 - Australian dollar lower awaiting Fed minutes

The Australian dollar is trending lower today as the market awaits the latest minutes meeting from the US Federal Reserve with most expecting the central bank to take a hawkish stance regarding interest rates.

AT 2.36pm (GMT) the Aussie dollar was trading US77.89c at down from US81.15c yesterday.

For the past 12 months the Fed has stuck with the word “patient” when it came to talk of an interest rate rise but some believe the tone will be different this time such as Mike Moran, chief economist at Daiwa Capital Markets America Inc who noted in an interview,

“I expect there was a fair amount of sentiment for dropping the word ‘patient’ in January, although obviously not a majority,”

“A strong push by some on the Fed committee to strip “patient” from the statement would signal that it is likely to be dropped at the next Fed meeting in March and put a June rate hike firmly on the table“ he added.

The only cloud hanging over the Feds decision to move on interest rates is the current inflation numbers, which have sat below the banks, preferred target rate of 2% since 2012 and may be a key factor today.

“Anything that gives us a sense of how willing they would be to hike, even against a low-inflation backdrop, will be important,” said Michelle Girard, chief U.S. economist at RBS Securities Inc. in Stamford, Connecticut.

“The big question in everybody’s mind is: can they raise interest rates without more tangible evidence, either in terms of wages or with the inflation numbers, that things are moving in the right direction?” Girard said.

The Australian dollar is expected to face a serious test holding on to its recent gains as this news hits the market.

 

[FIBOgroup]

19.02.2015 - Australian dollar weaker in late trade

The Australian dollar pulled back in late trading on Thursday as Standard and Poor's warned that Australia's federal budget could be hit by global economic worries which may effect its AAA rating.
At 3.47pm (GMT) the Aussie dollar was trading at US77.87c after reaching a high of US88.46c in yesterdays trade.

Recent sharp falls in commodity prices and especially Iron ore, Australia's biggest export is having an effect on the local budget which may cause a downgrade in ratings,

"Australia's budget outlook has weakened sharply in the last six months as commodity prices have plunged," a Wall Street Journal report showed, citing S&P's sovereign analyst Craig Michaels.

"Sliding prices of coal and iron ore, the country's biggest export, are hurting economic growth, denting corporate profits, driving higher unemployment and eroding government tax receipts," he warned.

Some analysts think that the Aussie dollar may have hit the bottom like Market Economics managing director Stephen Koukoulas who said the Australian dollar may have bottomed out and now might be the time for a bargain,

"It is always, always, always difficult to pick bottoms in currency markets, but that is what I am trying to position for with the Australian dollar," Mr Koukoulas said on his blog.

"It is now time to think about getting cautiously long, and anticipate some greater risk of a return to US80¢ and even US85¢ than a scenario of a sustained break towards US75¢. Trades that profit from the AUD [Australian dollar] ending 2015 at US82.5¢ and higher seem to be risks worth taking."

 

[FIBOgroup]

20.02.2015 - Australian dollar brushes off S&P fears

The Australian dollar has rallied today brushing off fears of a downgrade by the ratings agency S&P over potential budget problems in the nearest future.
At 3.50pm (GMT) the Aussie dollar was trading at US78.20c up from US77.89c in yesterday’s trade.

Ratings agency Standard and Poor released a statement yesterday that although Australia is in no immediate danger of losing its AAA credit rating, it needs to pullback on spending.

“The market brushed off the announcement pretty quickly,” noted analysts from Fibogroup forex brokers

“Many Countries and economies like the Eurozone are printing money to stimulate their economy whereas in Australia this option is not even on the cards so we think the budget is not in bad shape”

The reserve bank of Australia along with many analysts are claiming the Australian dollar is still overvalued but that’s not the case according to Ray Attrill, the NAB’s co-head of Currency Strategy,

“The RBA may be right to suggest that a lower AUD would promote more balanced growth, but its claim that the AUD remains overvalued rings hollow.”

Further weakness “is justified only if key fundamental drivers move further against the AUD”.

 

[FIBOgroup]

23.02.2015 - Australian dollar steady ahead of Greek deadline

The Australian dollar was trading higher today but then gave back most of the gains as caution spread that the agreement reached between the Eurozone ministers and Greece on Friday about an extension of the bailout deal was far from certain.

AT 11.37am (GMT) the Australian dollar was trading at US77.96c after reaching a high of US78.43c earlier in the day.

The Greek government now have until the end of Monday to draw up a list of reforms which they say will include a crackdown on tax evasion and more transparency from the country’s oligarchs.

"We are compiling a list of measures to make the Greek civil service more effective and to combat tax evasion," minister of state Nikos Pappas told Greek television network, Mega channel.

Even if all goes well some say the deal is a sinking ship and in the end Greece will never have the ability to fully repay their debts which will only cause further turmoil in the financial and currency markets.

Greek debt is not repayable in this life, Kingsley Jones, founder and CIO of Jevons Global, told CNBC on Monday: "We have to be realistic here. Greek debt is now 175 percent of gross domestic product (GDP); it's higher than it was when this whole business first started."

"Just look at Japan. It has government debt rapidly approaching 300 percent of GDP. One day, that debt pile simply implodes. It is not ever going to be repaid, nor will the Greek debt. There is no use standing on the high moral ground," Jones said.

The Aussie dollar may sit tight as the market awaits key data later in the week from the US such as the latest speech from Fed president Janet Yellen for a direction on US interest rates and the wage price index from Australia which may provide some clues on Australia’s deteriorating unemployment rate.

 

[FIBOgroup]

24.02.2015 - Australian dollar in Fed Yellen’s hands

The Australian dollar is trading sharply lower today on the back of US dollar strength and expectations of a bullish speech this afternoon from Federal Reserve president Janet Yellen.

At 9.09am (GMT) the Aussie dollar was trading at US77.46c down from US78.00c at close of trade yesterday.

The US dollar has been somewhat range bound for the last few weeks but this could all change today as the market gears up for the timing of an interest rate rise in the US with most Analysts predicting the move will happen somewhere between March and June.

"The U.S. dollar has been in consolidation mode. If Janet Yellen comes out sounding fairly hawkish and suggests the rate hike cycle could start in the middle of the year, the dollar could rise," said ANZ senior currency strategist Khoon Goh

One indicator likely to concern the Fed is the current inflation rate in the US which currently sits under the central bank’s target of 2% due to a number of factors including tumbling oil prices and sluggish growth, with most expecting it to remain there for the foreseeable future.

Michael Carey, Chief Economist at Brittany Baumann noted that the Fed may choose to overlook this, pointing to the continuing strength of the labor market as well as strong underlying wage growth.

“On the inflation front, Chair Yellen will likely note that price inflation has moved further away from the Fed’s 2% target, largely reflecting the declines in energy prices. We expect her to underscore that inflation expectations remain relatively well anchored and hence the impact of lower energy prices is likely to be transitory but needs to be monitored carefully”.

He said “Confidence that core inflation will eventually firm towards the Fed’s goal would be strengthened by continued improvement in job market conditions and underlying real growth sufficient to support additional labor market gains and wage growth along with some pick-up in market-based inflation measures”. He also added.

 

[FIBOgroup]

25.02.2015 - Australian dollar surges on Yellen’s testimony

The Australian dollar is sharply higher today after yesterday’s speech by US Fed president Janet Yellen and positive numbers out of China.

At 6.36am (GMT) the Aussie dollar was trading at US78.81c up from US78.30 at yesterday’s close.

In her testimony to the US congress yesterday, Yellen testified that the US Fed would assess the economic situation on a month by month basis before making any move on interest rates.

She also noted that while some sectors of the economy were moving forward, inflation is still well below the central banks comfort zone and wage growth continues to underperform,

“There has been important progress, however, despite this improvement, too many Americans remain unemployed or underemployed, wage growth is still sluggish and inflation remains well below our longer-run objective.” Yellen said.

The flash HSBC/Markit Purchasing Managers' Index (PMI) for the month of February came in at 50.1 today, slightly above the all-important 50 point level which shows the economy is in growth mode.

Although the number was positive, the index shows there are still risks associated from a lack of foreign demand and the government may have to step in further to help stimulate the economy.

According to HSBC chief China economist Hongbin Qu there was "a marginal improvement in the Chinese manufacturing sector going into the Chinese New Year period in February”.

"However, domestic economic activity is likely to remain sluggish and external demand looks uncertain. We believe more policy easing is still warranted at the current stage to support growth” he said.

 

[FIBOgroup]

27.02.2015 - Australian dollar braces for another rate cut

The Australian dollar is trading lower today after a round of positive news from the US yesterday as well as weak local capital expenditure figures released earlier today.

AT 5.36pm (AEDT) the Aussie dollar was trading at US77.91c down from US77.98c in yesterday’s trade

Durable goods orders in the US rose for the first time in three months to a seasonally adjusted 2.8% well above analysts’ expectations of a 0.6% rise amid signs that the manufacturing sector may be stabilizing.

“After months of weakness, business spending appears to be on somewhat firmer footing,” Sterne Agee Chief Economist Lindsey Piegza said in a note to clients.

Although the numbers were positive she noted,

“Quarters of inventory gains are likely to keep business investment under pressure.”

The odds of another interest rate hike from the Reserve bank of Australia increased yesterday after weak capital expenditure figures hit the market,

Figures from the Bureau of Statistics showed capital expenditure fell by 2.2% last quarter, to $37.5 billion much bigger than the expected 1.6% drop.

Expectations of an interest rate rise from the RBA rose above 50% after the announcement up from 38% before the data was released.

ANZ's co-head of Australian economics, Felicity Emmett noted that businesses are pessimistic at the moment and are hesitant about investing further in the economy which is why the RBA needs to cut rates further,

"The ongoing weakness in the outlook will provide further confirmation to the [Reserve] Bank that the economy needs further stimulus," she said

"We continue to expect another near term RBA rate cut, most probably at the March meeting."

 

[FIBOgroup]

03.02.2015 - Australian dollar faces 2nd rate cut

The Australian dollar is trading lower today as expectations mount that the RBA will cut interest rates again tomorrow for a 2nd consecutive time bringing the cash rate to a historical low of 2%.

At 7.00am (GMT) the local currency was trading at US77.61c down from US78.06c at close of trade on Friday.

Disappointing capital expenditure figures released last week increased the chance of a rate cut amongst analysts to around 55% up from 38% before the release of the news.

The number came in at -2.2% well below analysts’ expectations of a -1.6% fall and clearly shows that confidence in the business sector is fading.

Adding more evidence that a rate cut tomorrow was on the cards was Commonwealth Bank senior economist Michael Workman who noted that the Australian central Bank has a history of reducing rates in consecutive months,

"Usually when they cut rates, they don't just do one out of the blue and stop. It's normally two," he said.

Providing some support earlier today for the Aussie dollar was the surprise decision from the Chinese Central Bank to slash interest rates in order to kick start growth in their flagging economy.

The bank said it would cut the rate by 25 basis points as part of their stimulus program to restore confidence into the business sector.

Bank of New Zealand strategist Kymberly Martin said the Aussie dollar initially spiked after the announcement before giving back the gains as traders digested the news and its effect on the Australian dollar,

"Clearly, the Australian economy is quite closely linked to China so the initial knee-jerk reaction is that if the Chinese economy is doing better, that will be supportive for Aussie exports," Ms Martin said.

"But if you look a bit more deeply, the cut leads to a weaker yuan or signals further cuts, so the longer-term prospects are actually not supportive for the Aussie dollar."

 

[FIBOgroup]

03.03.2015 - Australian dollar rescued, but not for long

The Australian dollar is trading higher today after a shock decision by the Reserve Bank of Australia to keep interest rates on hold today at 2.25%.

At 9.20pm (AEDT) the Australian dollar was trading at US78.22c up from 78.06c at yesterdays close.

Most analysts before the decision had expected the central bank to cut rates again, following up from the reduction in February to bring the benchmark rate to a record low of 2.00%.

One of the deciding factors may have been the current state of the housing market which is sitting at record levels and the central bank may have been afraid to add fuel to the fire.

Although the RBA kept rates on hold Governor Glen Stevens noted that the currency remains overvalued, particularly when you take into consideration the fundamental factors and noted,
“The Australian dollar has declined noticeably against a rising US dollar, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy”.

Leaving the door open for further rate cuts he also noted that a close eye will be kept on inflation, with measures taken in order to reach the bank’s target rate,

“At today’s meeting the Board judged that, having eased monetary policy at the previous meeting, it was appropriate to hold interest rates steady for the time being. Further easing of policy may be appropriate over the period ahead, in order to foster sustainable growth in demand and inflation consistent with the target. The Board will further assess the case for such action at forthcoming meetings”.

Australia and New Zealand Banking group chief economist Warren Hogan noted that the bank would probably move on rates in April to cover for the lack of non-mining investments flowing into the economy.

"A sustained non-mining recovery remains elusive, dependent on new investment outside of the property and construction sectors," he said.

"Over the medium term, the currency is critical and there is little evidence that it is having the desired positive impact on investment decisions and employment as yet."

 

[FIBOgroup]

04.03.2015 - Australian dollar brushes off weak GDP figures

The Australian dollar has drifted higher today following on from yesterday’s decision by the RBA to keep interest rates on hold and brushing off weak GDP numbers released earlier today.

At 10.36am (GMT) the Aussie dollar was trading at US78.28c up from US78.14c at yesterdays close.

Gross domestic product out of Australia grew 0.5% in the last quarter of the year, slightly below expectations of a 0.6% increase.

The yearly figure came in at 2.5%, continuing its downtrend which analysts attribute to the end of the mining boom.

Although the RBA left rates on hold yesterday, the latest GDP figures may be a catalyst for the central bank to move on rates in April as the economy struggles to come to terms with the end of the mining boom.

“The soft growth outcome reflects falling mining investment, weak public spending and a large subtraction to growth from inventories,” said Felicity Emmett, economist at ANZ Bank.

“We expect the Reserve Bank of Australia to cut the cash rate by a further 25 basis points in April.”

The downward trend will have a snowball effect as businesses cut back on investments and workers, which will only add to the unemployment rate which currently sits at a 13 year high of 6.4%.

"The good news is we've now completed 23 years of continuous growth," said Michael Blythe, chief economist at Commonwealth Bank. "The bad news is we're still running below trend, which will keep upward pressure on the unemployment rate and the RBA (Reserve Bank of Australia) on rate-cut watch."

The retail sales figure from Australia is due out on Thursday which may show a further lack of confidence in consumer spending adding to the case for a rate hike and putting a lid on the Australian dollar’s recent gains.

 

[FIBOgroup]

05.03.2015 - Australian dollar uncertainty over wage growth, unemployment

In his speech at a conference in Sydney today deputy governor of the Reserve Bank of Australia Philip Lowe noted that wage growth in Australia remains slack, raising concerns amongst the Australian population about losing their jobs,

“One other change to the global monetary transmission mechanism that has echoes in Australia is the behavior of wages. As in many other countries, wage growth in Australia has been quite subdued and lower than would be suggested by most of our standard models,” he told the conference

“Increased job uncertainty is likely to be one of the factors here, with consumer surveys showing high levels of concern about future unemployment”. He also added.

Inflation in Australia is drifting below the central bank’s target rate with the governor mentioning that lower wages were a prime reason behind the trend,

“This low level of wage growth is contributing to quite low rates of inflation in a range of service industries”.

On the topic of the Australian dollar, the Mr. Lowe noted that the currency is still overvalued with external forces playing a big role,

“The scale of global monetary stimulus means that our exchange rate remains relatively high given the state of our overall economy,” he said

“The end result here is that global developments have left us with a higher exchange rate and lower interest rates than would otherwise have been the case. We may not like this configuration, but developments abroad give us little choice.”

The Australian Bureau of Statistics reported today that retail sales increased by 0.4% last month to $23.88 billion significantly higher than the 0.2% last month.

The number is a good sign and there should be more good news to come concerning the retail sector noted Deutsche Bank chief economist Adam Boyton,

"Looking ahead, we think there is a reasonable prospect of a lift in the retail sector, especially given lower petrol prices, lower interest rates and signs of renewed strength in the housing market." He said

 

[FIBOgroup]

06.03.2015 - Australian dollar awaits key employment data

The Australian dollar is trading slightly lower today awaiting key employment data out of the US which may determine the timing of an interest rate hike by the US Federal reserve.

AT 8.12am GMT the Australian dollar was trading at US77.96c down from US78.06c in yesterdays close

The forecast for the Non-farm payrolls figure today is 240.000 down from last month’s reading of 257,000 and the unemployment rate is predicted to fall to 5.6% down from 5.7%.

ANZ senior foreign exchange strategist Daniel Been noted that a strong non-farm payrolls figure today may force the US Fed to hike interest rates in June

'If we get a strong number tonight, it will likely sharpen people's expectations that we will see a June rate rise,' he said.

'A weak number will not be leapt on too greatly and actually, it will be seen by most as opportunity to sell Aussie dollars at better levels,' he added.

Capital Economics, an economic research group has predicted that the Australian dollar is headed to US70c by the end of the year as the Reserve bank of Australia cuts rates to as low as 1.5%.

"A larger fall in Australian interest rates than the markets expect and more rate hikes in the US will drive down the dollar to a six-year low," Paul Dales, chief Australia & NZ Economist for Capital Economics, said.

"It could even fall to US65c next year as the RBA keeps rates at 1.5 per cent and as the Fed hikes further."

 

[FIBOgroup]

09.03.2015 - Australian dollar plummets on US employment data

The Australian dollar is trading sharply lower today as strong employment numbers out of the US increased the pressure on the US Federal Reserve to hike interest rates

AT 2.52pm (GMT) the Aussie dollar was trading at US77.21c down from US78.01c in Fridays close.

Statistics from the US Labor Department late Friday showed that the US economy added 295,000 jobs in February, well above analysts’ expectations for a number of 235,000.

The unemployment rate fell to 5.5% compared to 5.7% in the previous month adding more strength to the overall job numbers.

The only downside in the report was the wage growth, with the average hourly wage rising just 3 cents to $24.78 an hour taking the yearly growth to around 2% and barely ahead of inflation.

Brushing of the growth in wages was Jim O'Sullivan, chief U.S. economist at High Frequency Economics who noted that it is only a matter of time before the falling unemployment rate give a boost to wage growth,

“Friday's figures provide more evidence that the labor market is recovering rapidly, with employment growth more than strong enough to keep the unemployment rate trending down” he said
, Falling unemployment "makes more acceleration in wages increasingly likely." he also added.

The 5.5% unemployment rate is quiet symbolic as this is the Feds target rate which signals a healthy economy,

"This is quite a symbolic change that increases the pressure on the Fed to hike rates in June," said Paul Dales, an economist at Capital Economics said.

Jim Paulsen, chief market strategist at Wells Capital Management, noted at the current pace, 5% unemployment is not out of the question which doesn’t go hand in hand with interest rates sitting near zero percent.

"I just can't imagine a Federal Reserve in this country arguing that we should have a zero interest rate structure when we have a sub-5 percent unemployment rate, or on the doorstep," Paulsen told CNBC.

 

[FIBOgroup]

10.03.2015 - Australian dollar brushes with US 75 cents

The Australian dollar continued it’s down ward spiral today, still reeling after the bumper employment numbers out of the US on Friday and expectations that the Chinese economy will need less stimulus than was first predicted.

At 1.31pm (GMT) the Aussie dollar was trading at US76.66c after hitting a low of US76.03c earlier in the day.

The monthly consumer price index from China came in at 1.2% against a consensus of 0.8% while the yearly CPI figure showed a reading of 1.4% against analyst’s forecasts of 0.9%.

The Australian dollar usually pushes higher in reaction to such positive news out of China as the country is Australia’s biggest trading partner but some may have read between the lines, taking into account the big picture.

Despite the rebound, the inflation rate is still less than half of the government's target of "around 3 per cent" for the year, writes Jamil Anderlini in Beijing.

"The main reason for the rebound in the CPI was the different timing of the lunar spring festival this year," said Chinese investment bank CICC in a research note on Tuesday.

"The monthly rebound in prices of fresh vegetables, fruit and pork was quite large and this was a reflection of the temporary impact of the lunar New Year. However, after seasonal adjustment there is still downward pressure on the CPI" they also noted

The latest CPI numbers may also have an effect on how far the Chinese government will go to stimulate the economy out of fear they may stoke instability in the long term.

"The lower target is credit positive because it underscores the administration's commitment to achieving a more sustainable but still high rate of expansion that does not jeopardize long- term macroeconomic stability through the buildup of excessive leverage," said Moody's Investors Service in a note.

 

[FIBOgroup]

12.03.2015 - Australian dollar receives temporary boost

The Australian dollar is trading higher today after the release of the latest jobless figures, which showed a slight fall in the unemployment rate.

At 9.29am (GMT) the Aussie dollar was trading at US76.71 after falling through the US76c mark in yesterday’s trading.

Data from the Australian Bureau of Statistics revealed the unemployment rate fell to 6.3% down from 6.4% a month earlier on the back of 15,600 new positions, coming in line with expectations.

Many see the result as temporary with the RBA still committed to cutting rates for the second time this year possibly in April

"We do not view the improvement in the unemployment rate as a change in the upward trend," said Australia and New Zealand Banking group's co-head of Australian economics Riki Polygenis.

"For the RBA, the unemployment rate is only just shy of its forecast peak of 6.4 per cent," she said.

The Australian dollar is heading down towards the RBA’s target level of US75c, which may bring some level of comfort although most expect that the central bank will continue to cut rates,
"We continue to expect further easing from the RBA in the first half of the year, most likely at the next board meeting in April."

The jobless rate remains at a 13 year high as the Australian economy comes to terms with the end of the mining boom which pulled the economy along for the last 20 years,

"We do not view the improvement in the unemployment rate as a change in the upward trend," ANZ Bank`s co-head of Australian economics Riki Polygenis said.

"Below-trend growth outcomes -- both past and expected -- are consistent with a further gradual rise in the unemployment rate from here, with new hiring insufficient to keep pace with retrenchments in industries such as mining and manufacturing."

 

[FIBOgroup]

13.03.2015 - Poor US retail sales fail to inspire Australian dollar

The Australian dollar failed to take advantage of disappointing US retail sales figures today, giving up most of the gains made earlier on in today’s trading.

At 3.47pm GMT) the Aussie dollar was trading at US76.29c down from US77.00c in yesterdays close.

The local currency jumped as high as US77.08c after the announcement that US retail sales fell 0.6% in February against analysts’ expectations of a 0.3% rise, bringing into question the timing of an interest rate hike as consumers reign in spending.

Brushing off the disappointing numbers was Michael Feroli, JPMorgan Chase & Co.’s New York-based chief U.S. economist who noted that the terrible weather conditions may have played a big part in the poor figures and investors should pay attention to the big picture including the robust labor market,

“It’s not disastrous, There could be some weather effect holding back retail sales. We still have a very good labor market and a lot of other things that are supportive of spending.” He said.
Paul Ashworth an economist from Capital Economics noted that although sales were disappointing it would only be a matter of time before lower gas prices and wage growth would filter into the economy,

“There is no denying that the lack of evidence of a pick-up in consumption growth is disappointing given the boost to purchasing power from lower energy prices,” he said

“But even though we haven't seen it feeding through yet, we do still expect to see that acceleration soon. The biggest driver of real consumption growth is real incomes, and those incomes have been rising at a dramatic pace recently.” He also noted

“It’s just more evidence that there is a negative bias towards the Australian dollar at the moment and we can only expect further losses” noted analysts from Fibogroup forex brokers.

“The US retail sales figure was way off the mark but it still wasn’t enough to keep the Aussie dollar above water so looking to the future it looks pretty grim for the currency”.

 

[FIBOgroup]

16.03.2015 - Australian dollar floating ahead of minutes meeting

The Australian dollar is sitting tight today, ahead of Tuesday’s minutes meeting from the Reserve Bank of Australia as the market awaits direction on monetary policy and in particular, the timing of another interest rate cut.

At 1204 pm (GMT), the Aussie dollar was trading at US76.41c slightly up from US76.34c at close of trade on Friday.

In their last meeting, the RBA kept rates on hold at 2.25% catching the market off guard with analysts now predicting the central bank will slash rates again in April to help kick start the economy after the end of the mining boom which ran for 2 decades.

Stephen Miller, the Sydney-based head of Australian fixed income at BlackRock, noted that he expects the RBA to cut rates by a further 50 basis points this year bringing the cash rate to 1.75%, which will see the currency fall to around US70c before years end.

"We anticipate further rate cuts; we're seeing significant declines in the prices of Australia's commodity exports, If we put all those things together, we could well see the Aussie dollar down towards US70¢ in the second half of this year."

If the Australian dollar survives the minutes meeting tomorrow it may only be short lived as the US Federal Reserve releases its latest interest rate decision on Wednesday followed by the accompanying monetary statement.

The market is now expecting the US central bank to lift interest rates in June from a record low of 0.25% which will mark the first increase since the global financial crisis.

The Fed is expected to take a hawkish stance regarding the US economy; especially in regards to the robust employment market which may see the Australian currency come under pressure as the US economy gathers momentum.