Bell FX Currency Outlook: Yesterday in Australia, the Minutes to the February Board Meeting provided few extra clues to recent public pronouncements by the Reserve Bank of Australia.
Australia: The key takeaway for us is that the cash rate is likely to remain stable unless either: (i) unemployment rises more sharply than forecast; (ii) the Bank's forecast for growth (at or a little below trend) is revised sharply lower; or (iii) the AUD were to rise sharply (in an environment of weaker or unchanged growth and commodity price fundamentals). Also in Australia yesterday, the weekly ANZ-Roy Morgan consumer confidence in Australia fell around 3% in the week ended February 16th to below its long-run average.
Majors: There were further signs in last night's economic data that severe weather has impacted activity in the US. The NAHB housing market survey fell sharply in February, declining to 46 from 56 (mkt: 56). This was the lowest level for the series since May 2013 and the largest monthly decline on record (since the survey began in 1985). In the UK, CPI inflation was weaker-than-expected in January at -0.6% m/m and 1.9% y/y (mkt: -0.5% m/m, +1.9% y/y). This is the first time since late 2009 that headline inflation has come in below the Bank of England's 2% target which we think ultimately gives the Bank more flexibility to leave interest rates lower for longer. In currency markets the USD was mixed. The JPY maintained its losses from the Asian session after the BOJ announced some extension to its lending programs, while the NZD fell independently, and with little news. This supported the AUDNZD despite AUD sentiment being dented by a surprise announcement from the PBOC that they were going to tighten liquidity. The USD fell against the other majors on the soft economic data. Wage numbers in Australia will be of interest today in Asia ahead of the FOMC minutes and the China Flash PMI later this week.
- 19 FEB AU Wage Cost Index QoQ/YoY 4Q
- AU Skilled Vacancies MoM Jan
- UK Bank of England Minutes
- US Fed Releases Minutes from FOMC Meeting
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