The Australian dollar fell sharply on Friday as positive data hit the market out of the US and Fed president Janet Yellen noted that an interest rate in the US was still on track.
The Aussie dollar finished the week of at US77.50c down from US78.26c at close of trade on Friday.
Quarterly GDP from the US came in at 0.2% against expectations of a 0.1% rise although the annualized figure came in at 2.2% against a consensus of 2.4%
The Reuters/Michigan Index which is a strong guide to consumer spending came in at 93 against expectations for a number of 92 although down from the previous month of 95.4 which some analysts blamed on the unusually harsh winter.
Although most are certain that the US central bank will raise rates this year the Fed is still keeping everybody in the dark on the timing of such a move reiterating that some indicators still need to improve further,
“I would be uncomfortable raising the federal funds rate if readings of wage growth, core consumer prices, and other indicators of underlying inflation pressures were to weaken, if market-based measures of inflation compensation were to fall appreciably further, or if survey-based measures were to begin to decline noticeably,” Yellen said on Friday.
When the Fed does begin on the path of raising rates Yellen noted that any moves would be introduced gradually to bring stability to the markets,
“If conditions do evolve in the manner that most of my [Fed] colleagues and I anticipate, I would expect the level of the federal funds rate to be normalized only gradually, reflecting the gradual diminution of headwinds from the financial crisis and the balance of risks I have enumerated of moving either too slowly or too quickly,” she said.
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