AUD/USD is showing little change on Wednesday, as the pair trades at the 0.82 line early in the North American session. On the release front, US CPI disappointed, posting a decline of 0.3%. Core CPI posted a small gain of 0.1%. Later in the day, the Federal Reserve will issue its policy statement. There are no Australian releases on Wednesday.
US inflation indicators continue to look very weak. CPI, the primary gauge of consumer inflation, dropped 0.3%, below the estimate of -0.1% This was the indicator’s weakest reading in over a year. Core CPI posted a weak gain of 0.1%, matching the forecast. The Federal Reserve will be in the spotlight on Wednesday, as the FOMC issues its monthly policy statement. With the US economy continuing to grow, the markets are confident that the Fed will take action and raise interest rates in the first half of 2015. One key question is whether the Fed will adjust its forward guidance; that is, will the Fed make use of policy statements to provide the markets with more information about its projections regarding interest rate policy. If this does occur, there will be less uncertainty about the Fed’s monetary policy and this could boost the US dollar against its major rivals.
The RBA released the minutes of its last policy meeting on Tuesday and policymakers took note of expectations in the market of a rate cut. The markets took this as a hint of a possible cut sometime in 2015, which puts the RBA on a divergent monetary stance to that of the Federal Reserve and the BOE, both of which are expected to raise rates next year. The minutes also noted that the central bank still considers the Aussie overvalued, especially with the recent declines in key commodity prices. Although the Aussie has dropped 12% since early September, the RBA minutes noted that the currency needed to drop further in order to achieve “balanced growth”. Last week, RBA Governor Glenn Stevens underscored this point last week, noting that he would like to see the Australian dollar at 75 US cents.
The week did not start out well in Australia, as New Motor Vehicles Sales dropped by 0.6%, its fifth decline in six readings. The indicator is an important gauge of consumer spending, as new cars and trucks are big-ticket items which consumers will forego if the economy is not doing well. As well, the government released its mid-year economic and fiscal outlook, which is a report card on how well the economy is doing compared to what was the forecast in the budget release back in May. The news was not encouraging, as the government noted that the budget deficit will come in at A$40.4 billion, up from the May estimate of A$29.8 billion. Also, the unemployment rate is forecast to hit 6.5% by mid-2015, up from 6.25% in the budget release.
AUD/USD for Wednesday, December 17, 2014
AUD/USD December 17 at 14:10 GMT
AUD/USD 0.8194 H: 0.8235 L: 0.8141
- AUD/USD posted sharp losses in the Asian session, support at 0.8150. AUD/USD has posted modest gains in the European session.
- On the upside, 0.8214 is under strong pressure and could see further action in the North American session. 0.8315 is stronger.
- 0.8150 is an immediate support line.
- Current range: 0.8150 to 0.8214.
Further levels in both directions:
- Below: 0.8150, 0.8081, 0.7904 and 0.7799
- Above: 0.8214, 0.8315, 0.8456, 0.8550 and 0.8668
OANDA’s Open Positions Ratio
AUD/USD ratio is almost unchanged on Wednesday, continuing the movement seen a day earlier. This is consistent with the pair, which is almost unchanged on the day. The ratio has a majority of long positions, indicative of trader bias towards AUD/USD moving higher.
- 13:30 US CPI. Estimate -0.1%. Actual -0.3%.
- 13:30 US Core CPI. Estimate 0.1%. Actual 0.1%.
- 13:30 US Current Account. Estimate -98B. Actual 100B.
- 15:30 US Crude Oil Inventories. Estimate -2.6M.
- 19:00 US FOMC Economic Projections.
- 19:00 US FOMC Statement.
- 19:00 US Federal Funds Rate. Estimate <0.25%.
- 19:30 US FOMC Press Conference.
*Key releases are highlighted in bold
*All release times are GMT