Global Themes

Aussie soars as Fed lifts rates, holds forecasts; jobs risk ahead

The Australian dollar jumped higher this after the US Federal Reserve lifted interest rates by 25 basis points to a new range of 0.75% to 1.00%.

The widely-expected move saw the US dollar ease lower.

The Fed continued to signal that it expects to raise rates on two more occasions this year. Some analysts had been looking for the Fed to raise market expectations for more than two hikes this year.

While the short-term reaction has seen the AUDUSD higher, on previous occasions Fed rate hikes has pushed the AUD lower over the medium term.

In December 2015, the AUDUSD was down 5.6% in one month after the Fed hiked, while in December 2016, the AUDUSD was down 4.6% in two weeks. (source: Reuters).

Sharply higher

The AUD was sharply higher versus the vast majority of currencies overnight.

The AUDUSD was up 1.9% as it climbed to the highest level since 23 February 2017.

The AUD was up 0.8% versus the euro and up 0.8% versus the Japanese yen.

The AUDNZD was also higher. The kiwi slipped ahead of today’s NZ GDP numbers due at 8.45am (AEDT).

Local jobs

Today’s major release is local jobs numbers due at 11.30am.

The market is looking for a higher-than-usual 16k new jobs with the unemployment rate expected to stay steady at 5.7%.

Later, policy decisions from Japan, Switzerland and the UK can also drive markets.

By Steven Dooley -- Currency Strategist (APAC)

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