Chinese trade data spoil the party for AUD and NZD
- NZDUSD close to highest valuation since 1984
- Traders expected more from FOMC minutes
- US inflation, employment figures remain strong
By Max McKegg
The Australian June employment data released earlier today came in close to analyst forecasts (15900 new jobs versus 12000 expected and unemployment at 6 percent versus 5.9 percent expected). The AUDUSD traded quietly after the announcement but gradually drifted down to 94.00 against 95.50 beforehand. This also dragged NZDUSD down after it had earlier got within inches of it’s highest level since it was floated in 1984. Click on the chart below for a long term record of NZDUSD.
As for inflation, the minutes showed it was viewed to be picking up but remained below the Fed’s long-run goal and inflation expectations were seen as being well anchored. Labour market indicators “generally showed further improvement”, although wages remained modest. Many analysts think low wage growth is the key factor supporting the Fed’s recent dovish stand.
Risks to the outlook were viewed to be broadly balanced. Some members were concerned that investors are growing complacent and taking excessive risks. The minutes also focused on exit strategy discussions, with adjustments to “interest on excess reserves” expected to play a central role in the policy normalisation process (changes to the Federal funds rate taking a back seat initially.) The Committee observed that “it would be useful for the FOMC to develop and communicate its plans to the public later this year, well before the first steps in normalising policy become appropriate".
- Edited by Adam Courtenay