Australian Dollar Outlook 4/5/2011
Australia: The AUD is relatively unchanged this morning as a quiet night in the offshore session did little to move the local currency. The AUD did make another push towards the USD1.0400, but was unable to sustain the increase and retreated back to its current level USD1.0365. In early morning trade yesterday the AUD once again hit a post-float high of USD1.0422 as local investors were able to digest the positive employment data that was released late Friday night.
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Today in Australia we have the RBA interest rate decision, due to be released at 2:30pm AEST, with markets all but guaranteeing that the RBA will keep interest rates on hold at 4.75%. With investors confident on what the RBA will do, close attention will be paid to its accompanying statement and whether there is any deviation from their recent neutral tone. It's likely that the RBA will mention the impact of the Japanese natural disasters; the higher AUD dampening inflationary pressures and also the impact of the higher oil prices on the Australian economy. Should the statement produce any surprises, then we may see some movement in the AUD
Majors: With a lack of data out of the US overnight, the USD was relatively directionless. Investors were instead looking towards what it likely to be announced tonight when the FOMC released the minutes from its March meeting. Members are divided as to whether the second round of quantitative easing (QE2) should be wound up. Many are saying that the recent improving economic conditions in the region shows that the economy doesn't require any further stimulation, while others still believe that the high unemployment and relatively mild inflation are justification for the QE2 to continue. The EUR/USD has weakened from its five month highs as investors still debate whether the European Central Bank (ECB) will pull the trigger and raise interest rates in the region on Thursday. Should the ECB increase rates it will be the first time since the global financial crisis almost 3 years ago. Many investors have been reducing their holdings of the EUR prior to the announcement. Tonight will see some more data out of Europe including Retail Sales for February, which could have some influence on the ECB decision come Thursday.
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