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Published on 29.03.2018 12:06

The Australian dollar is under further pressure today against the greenback after the release of GDP figures from the US came in above expectations which once again added substance for further rate hikes from the US Federal Reserve.

The GDP figures hit the market at 2.9 percent, well up from last month’s number of 2.5 percent which should allow the Fed to hike rates another 3 times this year.

A speech yesterday by a Fed board Member also added to the case to raise rates and he noted that he would like to see them sooner rather than later at the neutral rate which is 2.9 percent.

"For me personally, I think we need to get back to neutral," said Atlanta Fed President Raphael Bostic who is a voting member of the Fed's policy-setting committee.

"Unemployment is very close to something that is equivalent to a full employment position and inflation is approaching back to our 2 percent target. If things are running at close to where we hope that they'll be, then our policy doesn't need to be super accommodative," he added.

Rates in Australia on the other hand are set to stay on hold for some time which will the yield on the US dollar will overtake that of the Australian dollar which has not been seen for some time.

Towards the end of last year, markets were predicting 2 rate hikes from the RBA before the end of this year but now analysts believe there won’t be any move in rates until 2019 and the possibility of them moving lower cannot be ruled out.

This is expected to weigh on the Australian dollar in the coming months and earlier support levels will be crucial in saving the currency from heavy losses.

"If it breaks (76 cents) then the December low at 75 cents is next in line, with $0.7475 below that and then $0.7322," said Greg McKenna, chief market strategist at CFD and FX provider AxiTrader.


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Analyst

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