Australian one dollar coins
A handful of Australian one dollar coins is shown in Sydney, February 18, 2004. Reuters/Tim Wimborne

Bell FX Currency Outlook: As we expected the US FederalReserve left interest rates unchanged this morning but have left the door open for a possible rate rise in October or December.

Australia: Many financial participants had an early start this morning when the US central bank concluded its meeting at 4:00am AEST and decided to not move interest rates higher due to recent volatility in financial markets and increasing concerns on the health of the world economy. After the announcement the AUD had a quick spike upward but as this morning unfolds has settled down to the levels we saw yesterday afternoon. Fed President Janet Yellen said after the meeting that most Federal Reserve officials expected rates would still rise sometime in 2015. She said that economic activity continues to expand at a moderate rate and inflation remains lower than its long run objective of 2.0%. Fed member Jeffrey Lacker was the only official of the Fed who voted for a 25bp rise. Attention this morning will be on RBA Governor Glenn Stevens who will be addressing the House Standing Committee on Economics this morning beginning at 9:30am AEST. As always, his remarks will be closely scrutinised and the AUD may be a bit volatile.

Majors: The Fed indicated rates will rise as further improvement in the labour market occurs and inflation returns to the long term objective of 2%.The central bank has also revised their projections for the fed funds ratefor the end of 2015 lowering it from 0.625% to 0.375% which implies only one rate rise over the remaining months of 2015. For 2016 they have lowered it by 0.25% to 1.375% from 1.625% in June and ultimately theysee the rate getting to 3.50% versus its previous high point of 3.75%. GDP growth for 2015 was raised slightly from 1.9% to 2.15% and inflation of 2.0% will not be reached until 2018, one year later than their previous prediction. The Fed sees the unemployment rate falling to 4.8% in 2016and 2017, slightly lower than the level of 5% projected earlier. Overnight we saw some further improvement in the US labour market with initial weekly jobless claims falling to 264K from the previous level of 275k while new building permits were higher than expected. Continuing jobless claims also fell to 2237k from 2263k earlier. The Philadelphia branch ofthe US Fed’s business outlook fell by 6 which is the only negative overnight since a rise of 6.0 was expected. In the UK, retail sales rose 3.5% yoy which is only slightly lower than the 3.8% expected.

Economic Calendar 18 SEPT

  • AU RBA Governor meets with House Economics Committee
  • NZ ANZ Consumer Confidence Index
  • CA CPI MoM/YoY
  • US Lending Index

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