Bell FX Currency Outlook: The Australian Dollar is higher as the greenback is feeling the pressure over the approaching federal budget.
The Australian dollar and New Zealand dollar climbed to their respective month highs as investors became cautious ahead of the scheduled 2-day policy meeting of the US Federal Reserve which is expected to begin the slowdown of its massive stimulus program.
Australia: The AUD remains hemmed in above USD 0.9350 which is mainly due to the FOMC 'surprise' decision not to taper last week. Additionally, the fiscal position in the US is coming into play now. US Republicans are calling for cuts to President Barack Obama's healthcare package before they agree to raise the government's borrowing limit. Failure to reach a deal could force parts of the US government to be shut down. USD jitters over the negotiation was a factor in the greenback's fall against all the major currencies last night. Yesterday in Australia, the RBA published its semi-annual Financial Stability Review. Overall, the RBA said that the balance sheets of banks and households and businesses appear to be in relatively good shape. However, the still-high level of household indebtedness suggests that prudent borrowing behavior by households would be appropriate going forward. The Bank focused on the potential risks surrounding self-managed superannuation funds (SMSFs) as these have grown strongly in recent years and have leveraged into property, often on the recommendation of advisers. Today, the quarterly ABS job vacancies measure will be published at 11:30AEST and is expected to have fallen over the three months to August, with the ANZ job ads series 5% lower over that period. The implication is that jobs growth will be soft ahead which means, as the population grows, unemployment will likely rise. Eventually this is likely to be part of the renewed case for another RBA rate cut, although the odds of this happening before Christmas have been diminished by recent good readings on business and consumer confidence, in the wake of the Federal election. Expect the AUD to be steady today.
Majors: The USD was weaker against most G-10 currencies except for the Canadian dollar, where it had a modest gain but on a broader TWI basis was up by 0.2%. The European currencies were somewhat firmer overnight, reflecting improvements in German consumer confidence data and, according to some reports, the looming government debt ceiling in the United States. Other currencies were mostly contained to levels around their Asian closes. However, the EUR and GBP were around 0.5% higher with commentators pointing to the likely stability of these markets in the event of volatility in US markets in the event of a US default. Better- than-expected US new home sales data failed to elicit much reaction.
26 SEPT AU Job Vacancies
US Pending Home Sales
UK Current Account Balance
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