Wednesday was a volatile day for the Australian dollar, falling against all the majors and making some ground on the New Zealand dollar, a rare occurrence of late.
Tuesday night began the first day of the Annual Testimony to the Senate Committee in the US with Federal Reserve Chairwoman Janet Yellen addressing the Senate with an opening speech. Investors look for any possible indication of any future changes to the Interest Rates in the US based on her comments and this speech was no different.
Ms Yellen commented that they are largely unconcerned about the GDP decline, stating “my reading at the present time is that the GDP decline is largely due to factors that I would judge to be transitory” and that the GDP “substantially underestimates the momentum of the economy” but whilst she appears to be at least slightly positive on the current position and improvement of the economy, on the specifics of when they will look to raise interest rates her comments were vague saying this will depend on “progress towards our two congressionally mandated objectives: maximum employment and price stability.”
The next policy meeting is only two weeks away and it will be interesting what comes of this in relation to the Interest Rates in the US. The markets appeared to have taken this all as positive signs towards an Interest Rate rise in the near future as the AUDUSD went as low as 0.93325 during the course of yesterday’s sessions. Some recovery was made over the course of the day and last night, the pair opening this morning at 0.9364 at 8.30 am (AEST).
China GDP Figures were also released yesterday, with a positive result. The Year on Year figure is showing expansion from this time last year at 7.5% and their combined GDP YTD figure sitting as projected at 7.4%. Historically, the release of positive Chinese data provides some strength for the Australian dollar, however yesterday this positive data out of China did not provide any immediate support to the AUD.
Yesterday did however provide a gain on the AUDNZD pairing, with the pair on a downward trend of late with the New Zealand Dollar showing increasing strength with their high Interest Rate and projection to raise Interest Rates again. NZD Consumer Price Index was released yesterday morning with a result lower than forecasted at 1.6% against the estimated 1.8%. With inflation for the country lower than expected, and below the target range of 2-3%, it is possible that the RBNZ could delay the raising of Interest Rates for New Zealand. Any speculation in this possibility could cause a selloff of the currency and further weakness in NZD.