The Australian dollar was nursing hefty losses after upbeat US economic data reinforced expectations of higher for longer interest rates.
The Australian dollar was nursing hefty losses after upbeat US economic data soothed worries about a recession, but added to the case that the Federal Reserve will pursue its relentless battle against inflation with higher interest rates.to slow the pace of their rate increases to a quarter of a percentage point
Chairman Jerome Powell: Federal Reserve officials agreed that “ongoing increases” in the Fed’s key rate “would be appropriate”.The Australian dollar fell to its lowest in seven weeks, just below US68¢ on Wednesday, as the greenback outperformed most currencies. It steadied at US69.19¢ on Thursday, having shaved off 0.7 per cent since Monday.St Louis Fed president James Bullard saidMeanwhile, US business activity improved in February as the services sector regained its footing.
Futures imply the Fed funds rate will reach 5.36 per cent by July, and remain above 5 per cent all year.“Economic resilience is to be lauded, but central banks are uncomfortable with current levels of aggregate expenditure and labour market demand. They need to stay hawkish and are not yet in a position to declare that interest rates are sufficiently restrictive,” Mr Martin said.
Kristina Clifton, a senior economist at Commonwealth Bank, said the US, UK and New Zealand have a high share of fixed-rate mortgages, which insulate households from higher borrowing costs as rate increases are not passed through until their fixed term expires.
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