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Aussie holds steady ahead of RBA

H.S. Borji
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Aussie holds steady ahead of RBA

The Australian dollar traded within a narrow range versus the greenback Monday, as the markets shifted their attention to the Reserve Bank of Australia.

The RBA, which is scheduled to coalesce on Tuesday to discuss monetary policy, is expected to hold its benchmark lending rate at 2.5 percent. Soft consumer price inflation in the first quarter should allow policymakers to maintain their dovish stance, especially as it pertains to China.

Australian inflation rose 2.8 percent annually in April, the University of Melbourne reported today. Month-on-month, Australian inflation was 0.4 percent.

The rate statement should reaffirm the central bank is not considering any changes to its current policy stance. The RBA is expected to get that point across once again on Friday when it releases its quarterly monetary policy statement.

In other news, Australian building permits climbed 20 percent in March, following a gain of 22.9 percent the prior month.

The Australian dollar traded within a narrow range of 0.9253-0.9289 US. The AUDUSD pair consolidated at 0.8275, down 0.1 percent. The pair has climbed more than 4 percent over the past three months amid signs the economy was expanding at a faster pace. The Aussie climbed to a fresh 2014 high last month after labour market data continued to surprise to the upside. Australian employers added 18,100 jobs in March, following an upwardly revised gain of 48,200 the prior month, the ABS reported.

The ABS will release April jobs numbers on Thursday. Economists forecast a monthly gain of 6,750. Despite recent advances made in employment, the International Monetary Fund has cautioned the markets about Australia, downgrading the outlook of the world’s 12th largest economy from 3 percent to 2.7 percent.

In other trading, the Aussie was down more than 0.2 percent versus the New Zealand dollar. The AUDNZD pair dipped below 1.07 to settle at 1.0689.

On the US side of the trade table, a series of Federal Reserve speeches could make headlines this week. Federal Reserve Bank presidents James Bullard, Charles Evans and Narayana Kocherlakota are expected to make speeches this week.

Federal Reserve Chair Janet Yellen will testify before the Joint Economic Committee of the US Congress on Wednesday. Investors will use her testimony to gauge the outlook on monetary policy, and whether the central bank is expected to keep borrowing costs near zero for the foreseeable future. Yellen’s quest for clarity on interest rates has created more confusion, as investors continue to get pulled in opposite directions.

Fed officials’ latest rate forecast, released after the April policy meetings, showed the interest rate rising faster than initially forecast. Within an hour of that announcement Yellen told the markets to focus on the policy statement, which emphasized keeping the rate near zero.

Yellen’s testimony, it is hoped, will shed light on the Fed’s rate outlook, which could go a long way in shoring up the US dollar.

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