US Federal Reserve boss Janet Yellen's speech last week gave markets what they were expecting for quite some time, a US rate rise fairly soon. In fact market conditions have strengthened further in the US with continuing strength in the US jobs data and growth prospects. Governor Yellen indicated any rate rise will be gradual so it will arrive in what analysts believe in several tranches with one within the next month or so and another one towards the end of the calendar year. We certainly believe one rate hike will be delivered but given the past reluctance by the Fed citing weak global growth, it is likely that the Fed will like to understand the implications of the rate rise to fully flow through the economy before taking any further steps.
The Governor's speech has sent the USD soaring, and consequently the AUD fell from Friday's close of 76.40 US cents to 75.54 at 9.30 a.m. today. Fed Vice Chair Stanley Fisher said a rate rise can happen in September which sent the US treasury yields higher with the 2 year yields at its highest levels since June. Over the coming weeks, our dollar is likely to head south and will test 75 cent barrier before settling down to around 72 US cents in November if the RBA cuts rates after the release of the September quarter CPI data.
The Governor's speech has sent the USD soaring, and consequently the AUD fell from Friday's close of 76.40 US cents to 75.54 at 9.30 a.m. today. Fed Vice Chair Stanley Fisher said a rate rise can happen in September which sent the US treasury yields higher with the 2 year yields at its highest levels since June. Over the coming weeks, our dollar is likely to head south and will test 75 cent barrier before settling down to around 72 US cents in November if the RBA cuts rates after the release of the September quarter CPI data.
MARKET DATA
| Australia Cash rate Australia 90 day bank bill Australia 10 y bond US 10y Govt bond AUD/USD AUD/EUR AUD/JPY AUD/CNY ASX 200 S&P 500 Dow Jones Industrial Average Shanghai Composite Brent Oil (USD per BBL) Gold Spot (USD per oz) Iron Ore | As at 26-Aug 1.50 1.73 1.91 1.63 0.7640 0.6765 76.71 5.0916 5,515 2,169 18,395 3,070 49.92 1,319 61.60 | As at 19-Aug 1.50 1.75 1.90 1.59 0.7644 0.6744 76.63 5.0794 5,523 2,183 18,552 3,108 50.51 1,337 61.60 |
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