BlueNotes StatSnack: Rates react to US strength

Recent moves in interest rate swaps curve and the AUD

Australian events were overshadowed on the local market this week by the US Federal Reserve which continued to signal  interest rates in the world’s largest economy will stay low for some time.

"The US central bank suggested a steeper profile for rate hikes than the market was expecting."
ANZ Research

Of further significance though, was the fact that the US central bank suggested a steeper profile for rate hikes than the market was expecting.

This week's US data were again mostly firm. US initial jobless claims fell to a two-month low, the National Association of Home Builders (NAHB) leading indicator of the housing market pointed to further improvement - although housing starts and building permits declined.

The currency market reaction was the most aggressive with the US dollar rallying to a six-year high against the Yen. That saw the Australian dollar plunge to a six-month low of US89.27 cents.

Compounding the US impact on the A$ was Chinese data showing further signs the country’s 7.5 per cent GDP target will not be met.  Chinese industrial production is now at its weakest point since 2009.