The US dollar strengthened against major counterparts overnight, boosted by better than expected economic feedback and strong corporate earnings. The US dollar index which measures the dollar's value relative to six major foreign currencies has pared back yesterday's losses to trade at 80.46 up 0.96 per cent.
US Housing Starts beat expectations to rise 2.8 per cent in January, representing an annual rate of 591,000 from the previous upward revision of 580,000. Building permits however fell below targets recording a decline to 620,000 from a previous 650,000.
Import Price index grew 1.4 per cent in January to reflect annual growth of 11.5 per cent. Economist had predicted a more moderate rise of 0.9 per cent and 10.7 per cent respectively. Industrial Production also beat expectations to rise 0.9 per cent against a previous upward revision of 0.7 per cent.
The FOMC minutes were also released for February meeting which suggested employment will continue to improve at a gradual pace with the Fed expecting the jobless rate to only fall to between 8.2% and 8.5% next year and between 6.6% and 7.5% in 2012.
The minutes also provided insight into the disagreement from Kansas City Fed President Thomas Hoenig in relation to the Fed's stance on interest rates to remain exceptionally low levels of the federal funds rate for an extended period. The minutes indicated Hoenig believed the Fed's current stance would lay the groundwork for future financial imbalances and risk an increase in inflation expectations.
Locally, the latest burst of energy from the greenback saw the Aussie dollar slip back through 90 US cents overnight. At the time of writing the local unit is buying 89.8 US cents and price action is likely to be governed by equity market activity. We can also expect a speech by RBA Assistant Governor Philip Lowe to have sway on market activity as traders continue to pre-empt the RBA stance on interest rates in March. Economic news today includes NAB Business Confidence for the fourth quarter.