After taking a hit on Tuesday's local CPI data, the Australian dollar has regained composure with a steady upward trajectory held over the last 48 hours. After looking decidedly vulnerable below the 103-handle, the local unit has bounced off 2-week lows of 102.46 US cents and currently steady above the 103.5 US cent levels.
Stronger than anticipated U.S earnings remain a positive thematic for risk sentiment with the premise of further U.S quantitative easing also providing a leg-up for risk contingent assets such as the Australian dollar. Uninspiring durable goods data failed to have a sustained effect on risk sentiment with stronger than anticipated earnings from tech giant Apple and the Fed's economic assessment remaining the primary focus. We're seeing the common theme of stimulus expectations guide U.S dollar positioning which was apparent overnight after Fed Chief Ben Bernanke signaled further stimulus remains a possibility.
As anticipated, the FOMC kept interest rates at record lows and reiterated their intentions to maintain an 'exceptionally low federal funds rate through late 2014.' True to form it was the ensuing statement and press conference that provided the key directive across markets. In his quarterly press conference Mr. Bernanke said the Federal Reserve remains prepared to do more as needed to make sure that this recovery continues with additional balance sheet actions very much on the table. While upgrading their 2012 economic growth forecast, the Fed also trimmed 2013/14 their January forecasts but remain slightly more optimistic on U.S jobs outlook, upgrading their unemployment forecast for 2012/13 with the trajectory likely to see the official unemployment rate fall between 6.7 and 7.4 percent in 2014. Although the Fed have expressed a willingness to embark of further stimulus, in essence the central bank would need to see a deterioration and growth and weaker inflation to feasibly embark on another round of quantitative easing.
Local economic data today includes the Conference Board leading Index at 10 am AEST with the DEWR Skilled Vacancies index due for release at 11am AEST. The Aussie dollar is currently adhering to a short term ascending channel with support noted around 103.45 US cents, however we anticipate regional equities to set the pace during domestic trade with any upside likely to be contained around 103.8 U.S cents.