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Australian dollar soars above US 80¢ after dovish FOMC statement

BY BRETT OTTAWA

The Australian Dollar soared in overnight trading in the wake of a dovish Federal Reserve statement. Reaching a high of 0.8013, the Aussie opens this morning slightly lower at 0.8001. Starting yesterday in relatively neutral territory the Australian Dollar quickly saw some movement when the Australian CPI results came in under expectation. Falling rapidly to 0.7878, the Aussie regained much of its losses during the Asian session as commodities again fuelled demand for the Aussie. Led by Iron Ore, the AUD rebounded to above the 0.79 level before the Federal Reserves’ comments sparked a broad sell-off of the USD and sent the Aussie even higher to finally pierce the 0.8 mark. Traders now turn back to off-shore announcements for further direction for the pair.  

The New Zealand Dollar has rallied overnight to a two-year high against the Greenback, the pair moved swiftly after the FOMC’s policy statement had more of a dovish tone which financial markets quickly reacted to moving from 0.7430 a high of 0.7489. On the data front, locally yesterday NZ Trade balance posted a fourth consecutive monthly surplus in June thanks mainly to a rise in dairy prices according to a report from the Statistics of New Zealand. Milk powder, butter and cheese groups continue to be a key export commodity, the surplus rose to 242m vs an expected increase of 150m. The NZD/USD currently changing hands at 0.7524 expect to see some volatility in the NZD/USD cross as markets digest the FOMC statement and US top tier data scheduled today.

The Great British Pound traded in a lacklustre range during the Asian session, holding above this week’s support level of 1.30 against the US Dollar. Sterling moved higher during the domestic session in the UK as British Preliminary GDP rose by 0.3% in the second quarter of 2017, rising from 0.2% in Q1. Cable saw an initial move higher to 1.3050 leading into the Fed decision where interest rates remained on hold at the benchmark rate between 1.00 - 1.25%. It was the relatively dovish statement though that saw the US Dollar sold off with Cable pushing through the 1.31 barrier and a retest of 10 month highs of 1.3125 at the close of North American trading. GBP/USD opens this morning at 1.3115 and is lower against the Australian dollar - 1.6390 and Kiwi – 1.7430.

Overnight the US Federal Reserve decided to keep official interest rates on hold at 1.25 per cent, which was expected, as Janet Yellen failed to surprise the market indicated the Fed will begin reducing its balance sheet "relatively soon,". On the back of the Federal Reserve’s monetary policy statement release the Greenback fell against a half-dozen of its major rivals. Most notably, the EUR/USD reached a 52 week high of 1.1747 while the Australian dollar also advanced to a two year high of 0.8013. Looking ahead today at the US macro-economic calendar and we will see the release of Unemployment Claims, Durable Goods and Goods Trade Balance which will continue to generate any short-term volatility in the market.