By guest contributor Stuart Talman, Director of Australian Sales, XE.com
The Aussie dollar finished just over 1% higher vs the US dollar for the past week with the US dollar falling out of favour, due primarily to comments from Fed chair, Jerome Powell.
Speaking at the Economic Club of New York during the early hours of THURS. morning, the focus on Powell’s speech was on financial stability and the outlook for the US economy. Powell highlighting the strong performance of the US economy but sounding cautious regarding the outlook.
His comments that garnered the most attention and derived a reaction from investors were his views on the current level of US interest rates, describing these as “just below” neutral. The level at which interest rates neither constrict nor stimulate the economy, these comments were in stark contrast to his views in early October – Powell commenting then that US rates were a “long way” from neutral.
Whist another US rate hike is widely expected for December, Powell’s shift in rhetoric does cloud the outlook for 2019 hikes. If a December hike proceeds as expected, 2018 would yield 4 hikes and bring the current tightening cycle, which commenced in 2015 to a total of 8 hikes.