Currency Update: The Australian Dollar is range bound again this morning courtesy of the continuing US political stalemate. Australia: The #AUD is trading at 0.9430 which is pretty much unchanged from Tuesday. #Equity markets fell again overnight as the US Budget impasse continues. Uncertainty remains over how long the partial US government #shutdown will continue. There are also concerns that the US government will not have enough money to pay its bills if an agreement to raise the debt ceiling is not reached by October 17. Senate #Democrats are reportedly planning a test vote by the end of the week that would raise the debt ceiling by around $1trn, without including any of the spending cuts sought by Republicans. That would then have to pass the Republican controlled House. Meanwhile President #Obama warned the US risks a ‘very deep recession’ if Congress does not raise the debt ceiling, and told John Boehner that he is willing to negotiate on topics such as health care, but only after the government is reopened and the debt ceiling raised. The uncertainty, combined with the recent lack of economic data, has seen currencies trading in narrow ranges. The AUD received little support from the strong #NAB Business Confidence reading yesterday. The Federal Election result, lower interest rates and rising asset prices have supported the recent gains. Business conditions remain negative, but the forward indicators point to some improvement in activity and suggest the #RBA will remain on hold for the rest of this year. Consumer confidence is released today for October, however it needs to be analysed against the increase in unemployment to 5.8% and the current US fiscal woes. Broadly, the AUD appears held up by a weak #USD as the market uses the US government shutdown to push out its expectations for tapering. The clear risk is that at some point the market gives up on the implications for monetary policy and focuses on global financial market stability, which would imply broad-based and non-linear demand for the USD. Majors: As written, there were limited changes in major currencies with the #CAD being the only exception, succumbing to weak technical signals to see USD/CAD rally by around 50 pips. The IMF revised its global growth forecasts for 2013 and 2014 down to 2.9% and 3.6%, warning a US default “could seriously damage the global economy’, but its forecasts do not assume such a scenario. Overall growth in the Advanced economies was unchanged, but forecasts for Emerging Markets and Developing Economies were revised lower, most notably in #India, #Brazil and #China. Tonight, the Minutes from the September 18 FOMC Meeting are released, the meeting at which the Fed failed to deliver the anticipated start to QE tapering. Although now superseded by the US fiscal woes, the Minutes will be crucial to see just how close the Fed came to starting its tapering. Today’s Forecast Range: USD 0.9405 -0.9475
Posted on: Tue, 08 Oct 2013 23:26:09 +0000
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