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Sean Callow, analyst at Westpac, notes that the AUD/USD avoided 0.7000 by a whisker and is up modestly over the week, but it certainly did not find inspiration in local data.

Key Quotes

“The NAB business survey reported weaker conditions and confidence, with both indexes now below long-term averages. Housing finance approvals fell again in Jan, taking the annual decline to -21%.”

“Consumer sentiment also weakened, the Westpac-MI survey for March sliding -4.8%, including -8% for the portion of the survey conducted after the Q4 GDP data. Markets are priced for 1.5 RBA rate cuts by year-end, though we do note increased talk of looser fiscal policy in the 2 April federal budget, just weeks ahead of the election.”

“Risk appetite has improved this week (MSCI World up the past 3 days) and AUD/USD might also find some support from a softer US dollar tone into the FOMC meeting. A steady hand is assured at 2.25-2.50%, which as the chart shows, remains attractive by global standards.”

“But USD could struggle on the quarterly Summary of Economic Projections, especially on the “dots” of the likely path of the funds rate. These will fall – the only question is how far.”