Fed Harker Says he is Open to a March Rate Increase, AUD/USD Exchange Rate Tumbles
The Australian Dollar US Dollar (AUD/USD) exchange rate continued its descent on Thursday as markets reacted to hawkish comments from Philadelphia Fed President Patrick Harker, a drop in US initial jobless claims, and dovish remarks from Reserve Bank of Australia (RBA) Governor Philip Lowe.
During a Q&A session in New York, Harker announced that he is open to the US central bank raising its key interest rate in March.
‘I’m open to a March rate increase’, he told the press, adding that he has ‘lightly pencilled in’ two rate hikes for 2018 but that he could see a third one depending on whether inflation continues to rise, and financial conditions remain loose.
In this sense Harker’s comments proved somewhat of a tease – the central bank is very much aware of the upbeat US employment and wage growth readings and markets are increasingly pricing in at least 3 in 2018 as a reflection of this.
In other news US jobless claims tumbled totalled 221k in February, down from the previous period’s 230k and the forecast of 232k.
This marked a staggering 45 year low in claims – underlining the fact that the labour market is indeed tightening and that wage growth and higher levels of inflation could continue to follow.
RBA Lowe Proves Dovish, Australian Dollar (AUD) Exchange Rates Struggle
RBA Governor Philip Lowe has announced that he does not see a ‘strong case’ for a near-term rate hike – continuing to assert that the bank isn’t obliged to follow a global trend in the withdrawal of stimulus.
‘Our circumstances are a little different. We are still some way from what could be considered full employment and our central scenario for inflation is for it to remain below the mid-point of the medium-term target range for the next couple of years’.
The bank chief also asserted that he expects to see progress on reducing the jobless rate, as well as ramping up inflation into its 2-3% target range.
When these factors have sufficiently progressed then the bank could consider conditions to be viable.
On the data front Australia’s NAB business surveys proved slightly mixed.
On one hand, business confidence in the nation slipped from a score of 8, to a score of 6, but business conditions proved rather positive, rising by +15 in Q4 2017 – the highest reading since early 2008.
This news ultimately proved ineffective in supporting the Australian Dollar, however, with the AUD/USD exchange rate remaining firmly in the ‘Greenback’s’ favour.
AUD/USD Exchange Rate Forecast: Volatility Possible as US Congress Prepares to Vote on Budget to Avert Shutdown
The Australian Dollar US Dollar (AUD/USD) exchange rate could encounter some turbulence tonight as markets react to the US Senate and House Representatives voting on a proposed budget deal that could avert, or cause another government shutdown.
The plan to keep the government operating has faced ongoing resistance from some members of the Republican Party, which seeks less spending on Government and indeed many liberal Democrats, who want to continue to withhold support to leverage concessions on immigration.
The Democrats are increasingly cautious about prompting another shutdown, however, and the potential backlash that it could cause in the public perception of their party.
Nonetheless, House Speaker Paul Ryan, amongst others, thinks that there would be enough votes to pass the deal.
If the deal is passed then the US Dollar (USD) could continue its rally.
If another shutdown occurs, however, then the Australian Dollar (AUD) could claw back some losses.