Bell FX Currency Outlook: Australian Dollar at fresh highs as US Fed stimulus gives sentiment a boost.
Australia: The Australian Dollar has risen to fresh three month highs after the US Federal Reserve announced a new wave of stimulus measures for the sluggish economy. The AUD traded to a high above 1.0580 against a sharply weaker Greenback and is mixed against the crosses.
Markets were generally higher across the board as the FOMC announced it will start buying USD 45bn per month of longer term US Treasury securities to replace the expiring "Operation Twist".
This new programme is in addition to the ongoing $40bn per month in mortgage-backed securities. Locally, RBA Governor Glenn Stevens gave a speech in Thailand yesterday on the "Challenges for Central Banking".
The speech did not touch on the Australian economy, but made reference to the current limits to what central banks can do in the current environment. With little domestic data due out today, the AUD is expected to remain firm and has potential to move higher.
Majors: US equities initially rallied post FOMC announcement although sold off later in the session. In the press conference post the announcement, Fed Chairman Bernanke added that the Fed's ability to provide further accommodation, given that interest rates are near zero and their balance sheet is already quite large, will be reasonably limited.
He also added that Congress should avoid policies that could start to slow growth and limit the recovery. The DJIA ended the session 0.3% higher at
13,288 while the S&P 500 was 0.4% higher at 1,434. European equities also saw a marginal rise with the German DAX ending 0.3% higher at 7,615 and the FTSE ending 0.4% higher at 5,946.
The European session ended however, before the US Fed's announcement. Oil markets were also buoyed by the announcement with Brent rising 1.3% to USD 109.7 per barrel while WTI futures rose 1.3% to USD 86.9 per barrel.
Commodity and metals were mixed although broadly higher, while gold also firmed ending 0.3% higher at USD 1,715 per ounce. Tonight will see
US existing home sales and Manufacturing data released in the states.
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