The Australian Dollar continued its rally against the greenback yesterday with 2 out of the 3 Fed governors speaking at different key events around the U.S. reiterating that lower interest rates are here to stay in the medium term. Another reason for the continued AUD strength was domestic data releases out of Australia were better than expected. Westpac consumer confidence posted a number above forecasts and a housing market which seems to be stabilising with February home loans rising by a better than expected 2.3%. Investment lending was also above analysts’ expectations, adding fuel to comments in Governor Stevens’ speech a couple of weeks ago that the Australian economy is slowly stabilising and starting to see signs of growth.
The U.S Federal Reserve also released its minutes from the March 18-19 meeting where several Fed officials continued to warn that forecasts pertaining to the rate hike pace were dramatically over stated thereby failing to backup Janet Yellen’s comments that impending rate hikes would commence as early as six months after the ending of Q.E. The minutes also revealed that many Fed Officials saw an on-going sluggish labour market while expecting a gradual decline in the unemployment rate, as inflation moves towards the goal of 2%.
Since Janet Yellen’s comments that rate hikes might begin as early as 2015, announced in her speech after the March meeting, she seems to have done an about face by saying that at the end of March the U.S. economy will continue to need on-going support for some time
The Aussie Dollar found comfort in all of this with it hitting an intraday high against the USD of 0.94, levels not seen since November of last year and bringing into sight the 0.9550 target that BNP Paribas and BOA Merrill Lynch forecast a couple of weeks ago.
The Australian Unemployment Numbers released today might be the tail wind needed to achieve that target with a forecast 5000 jobs forecast to be added for the month of March, a bar set very low considering that 45000+ jobs were added in February and an economy that seems to be on the up.
This rally in the Aussie dollar might seem to some to be rather over extended, baffling the majority of traders out there, but one analogy from the financial markets always stands true, ‘’The markets can stay irrational longer than you can stay solvent’’.