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Currency Market Analysis

May 25, 2017 | Currency Market Analysis

Global Themes

AUDUSD sees best close since 2 May on Fed minutes

The Australian dollar was sharply higher overnight as a more cautious Fed produced Aussie dollar strength.

The Federal Reserve minutes, released overnight, continued to signal the Fed was keen to raise rates, but some members raised a note of caution about a slowing in inflation.

The release saw the greenback slip. The AUDUSD gained 0.3% to finish at the best level since 2 May.

Downgrade

Earlier, the Aussie was pressured yesterday after Moody’s downgraded Chinese debt from Aa3 to A1 (from fourth-highest to fifth-highest ranking).

This downgrade was the driver of the Aussie’s mid-session swoon.

Commodities were hit by the news and iron ore resumed its downtrend as it fell back below USD60 per tonne.

The news kept the Aussie subdued versus other currencies, with the AUDEUR flat and the AUDGBP up 0.2%.

Fed focus

The major local focus today is on a speech from RBA assistant governor Guy Debelle who will present at the launch of the FX Global Code in London at 6.00pm AEST.

From overseas, UK GDP can have an impact on the British pound, while a speech from key US policy-maker Lael Brainard will also be closely watched after last night’s Fed minutes.


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