The Australian dollar is trading lower today after a speech by Federal Reserve president Janet Yellen that a rate hike in December is still on the table despite some recent disappointing data.
AT 10am (GMT) the Aussie dollar was trading at US71.27c down from US71.48c at close of trade yesterday.
In a speech to congress yesterday,Yellen noted that overall, the economy was performing well, and there is a real case for tightening monetary policy next month, although it is not a done deal.
“At this point, I see the US economy as performing well. Domestic spending has been growing at a solid pace,” Yellen said.
One of the reasons the Fed has been holding back on rates is the inflation figure, which is below the central bank’s target of 2 percent. Yellen seemed to brush off that worry by noting that the problem is temporary, and is connected to the current low energy prices.
“Inflation is running considerably below our 2% objective, nevertheless, the committee judges that an important reason for that is the declines in energy prices and the prices of non-energy imports,” she said.
The market will now await tomorrow’s speech from Reserve Bank Governor Glen Stevens where he is expected to mention that the Australian economy is moving along and slowly making the transition from the mining boom.
He is also expected to note that the RBA is ready to cut rates if conditions deteriorate which may see the Aussie dollar come under further pressure.
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