Fed officials likely to wait on macro data rebound before rising rates again

Fundamental Analysis

AUD

"The near-term outlook remains soft. There is no strong signal of a pick up in business investment. The first estimate for 2017/18 implies something close to flat relative to this year in terms of non-mining investment in nominal terms.”

- Michael Turner, RBC Capital Markets

Australian business investment plunged more than anticipated in the final quarter of 2016, official data revealed on Wednesday. According to the Australian Bureau of Statistics, private capital expenditure dropped 2.1% to settle at $27.4B in Q4 on a seasonally adjusted basis, whilst analysts predicted the data to post a moderate decline of 0.5% in the reported period. The reading followed an upwardly revised 3.3% contraction observed through July-September quarter and marked the fourth straight quarterly slide in business investment in Australian firms. CAPEX at services sector enjoyed a 1.8% rally over the final quarter of the previous year, being outperformed by a 3.2% increase in capital expenditure in manufacturing companies. Nevertheless, the positive impact of the latter two sectors was completely wiped out by a dramatic 9.3% plunge in mining CAPEX, which is now standing at the lowest mark in nearly eight years. Furthermore, building CAPEX also fell in the reported quarter, declining 4.1% to $15.3B, compared to a 3.6% slump observed in the Q3. Overall, the ABS report suggested that the short-term outlook for the economy remains soft.

USD

"The pattern (in jobless claims) is consistent with the trend in employment growth remaining strong — more than strong enough to keep the unemployment rate trending down."
- Jim O'Sullivan, High Frequency Economics

The number of Americans filing for unemployment benefits increased slightly more than expected last week, though the four-week average dropped 4,000 to 241,000, weakest level since 1973, official figures revealed on Thursday. Last week's results were driven by growing economy and tight labour market, which is likely to prompt companies to retain experienced workers, supporting wage growth. According to the US Department of Labour, national jobless claims rose 6,000 to 244,000 during the week ended February 17 from the preceding week's upwardly revised 238,000. Meanwhile, economists anticipated an acceleration to 242,000 during the reported period. Filings have been holding below 300,000 for 103 straight weeks, showing healthy signs of the US job market. In the meantime, continuing claims fell 17,000 to 2.06 million during the week ended February 11, while their four-week moving average dropped 10,750. Overall, the Federal Reserve is widely expected to increase interest rates fairly soon, with labour market and inflation data set to reveal better performance. The last time the Fed raised its benchmark overnight rate was in December last year, when the rate was increased from 0.5% to 0.75%.

Download The Full Daily Forex Fundamental Overview