A strong performance on US equities governed currency activity overnight driven by positive corporate earnings from heavy weights JPMorgan Chase and Intel. Positive economic data before the US open put investor mood in good stead. Retail Sales climbed 1.6 percent in March surpassing expectations of 1 percent growth. Retail Sales excluding Auto also came in stronger than expected to record 0.6 percent growth in March. US Consumer Price Index rose in line with estimates recording 0.1 percent growth in March to represent an annual inflation rate of 2.3 percent.
The Fed’s beige book suggested the economy is expanding as consumer spending and manufacturing has gained traction, albeit at a subdued pace. The reported stated “Overall economic activity increased somewhat since the last report across all Federal Reserve Districts except St. Louis, which reported ‘softened’ economic conditions,”
Federal Reserve Chairman Ben Bernanke also gave testimony overnight, but failed to provide any further insight into whether a change to the “exceptionally lows interest rates for an extended period” language is on the cards. In testimony to congress Bernanke provided a mildly positive view of economic growth going forward stating “On balance, the incoming data suggest that growth in private final demand will be sufficient to promote a moderate economic recovery in coming quarters,”
Increase in risk appetite saw higher yielding assets the primary beneficiary’s at the expense of the greenback which lost ground against most major counterparts.
Locally the Aussie dollar had a strong night and remains near intra-day highs of 93.6 US cents. From a technical perspective the latest burst of energy from the Aussie dollar coincides with the RSI (Relative Strength Index) on the verge of showing overbought signals with the price action near to the ‘70’ levels. Technical analysts believe an RSI reading of ‘70’ or greater suggests a reversal of price action is imminent. The local unit may be technically poised for a reversal however we expect economic data from China to be the primary driver in domestic trade. The Chinese economy will today report a host of economic data including retail sales, consumer price Index, industrial production and GDP for the first quarter.