After an Interest Rate hold decision on Tuesday, the market has pushed the AUD well above the average levels of last week. The Reserve Bank of Australia has jarred the door for future monetary easing. For May, the likelihood of cuts have now increased; as pricing effects have been made both in the 30 day interbank cash rate futures market and also the considerable fall in the AUD.
Federal Reserve President Dudley spoke last night; his speech gave no assistance to the USD/AUD. He said in his announcement that Interest Rate hikes are still a possibility in June. Saying;
‘June rate hike still in play depending on inflation and the labour market outlook.‘
He also mentioned that Business spending is expected to begin to accelerate in the second quarter of 2015. However, consumer spending and Business investment are currently weak areas of the economy. Finally, the last point mentioned was that slowing recovery in the US housing market. The announcement last night only hindered the USD/AUD exchange rate; nevertheless this may only hold in the short run.
The UK is set for their Interest rate announcement tonight. The figures are set to change and the Bank of England is expected to leave the rate on a record low of 0.5% and the Asset Purchasing Facility is expected to stay at GBP 375 billion. The accompanying announcement From Governor Mark Carney should cause some volatility in the AUD/GBP pairing; the comments will most likely fuel interest rate speculation and the short fall in the current UK inflation levels.
The Australian Industry Construction index is due out today; it has and is likely in remain in contraction; as the figure has been showing contraction levels since December 2014. Australia has some minor releases tomorrow in regards to Home loans; which are likely to increase as a result of the recent cuts to the Australian cash rate. Inflation figures out of China are not expected to be overly positive. The figure is expected to be released at 1.3%, down from last month’s 1.4%. This may push the AUD lower heading in to the end of the week.