Bell FX Currency Outlook: The Australian Dollar has recovered back above USD0.9800 overnight as markets took a breather from recent rallies.
An employee counts U.S. dollar banknotes as yuan banknotes are seen at a branch of the Industrial and Commercial Bank of China in Huaibei, Anhui province in this May 25, 2010 file photo.
Australia: After consolidating in the mid USD0.97s for most of yesterday, the AUD managed to claw its way back above USD0.9800 overnight on the back of a slightly weaker USD.
Friday night the AUD fell to as low as USD0.9711, suffering massive losses along with its New Zealand counterpart. However it seemed the USD rally stalled overnight as traders took to the sidelines ahead of an economically-busy week.
Today the release of the Reserve Bank of Australia's May board meeting minutes affirms the central bank's goal to strengthen the domestic economy by giving the needed boost for the business sectors. The RBA minutes indicated
"Conditions in the business sector, as assessed in surveys, generally had remained below average, possibly in part because the exchange rate had remained high," the RBA said in minutes of its May 7 meeting released today in Sydney. "Increasingly, the household sector had shown signs of responding to" lower rates.
These will be a key factor as to whether the AUD will continue to rise today.
At its May 7 meeting, the RBA surprised the market by cutting the cash rate to a record low of 2.75%, citing concerns about global growth and a strong AUD. If today's minutes hint that there are more rate cuts on the agenda then the AUD it highly likely to resume its slide, testing its recent lows. On the other hand if there is a hint of optimism then this will likely support the local currency and we may see it slightly higher.
Majors: As mentioned above, the USD's rallied stalled overnight as traders wait for Wednesday's Testimony from US Federal Reserve Chairman Ben Benanke. The USD recent rally has been mainly driven by investor expectation the US Federal Reserve will soon end its economic stimulus program following such positive and encouraging US economic data.
So it's expected that if Mr Benanke drops even the slightest hint that they could vary bond buying or sounds optimistic about the economic outlook, then there is every chance the USD could hit new highs.
Alternatively if he spends more time talking about the constraints in the US economy and the fiscal drag the USD could fall aggressively lower.
21 MAY AU RBA Policy Meeting - May Minutes
US Fed's Dudley Speaks in New York
NZ RBNZ Survey of Expectations
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