New York Fed President William Dudley said US economic environment is "mostly favourable", but the US central bank remains cautious in hiking interest rates as threats loom. Dudley reiterated he was confident that too-low inflation would climb to a 2% target over the next few years, with "economic conditions have finally warranted the start of U.S. monetary policy normalization." The policy maker repeated his view that the Fed should take a gradual and cautious approach to monetary policy tightening amid significant uncertainties and headwinds to growth stemming from the financial crisis, which have not fully abated. At the same time, Boston Fed President Eric Rosengren said the US central bank is set to raise interest rates more quickly than investors currently expect. Rosengren said US inflation was now "much closer" to the central bank's goal, downplayed weak growth in the beginning of the year, and said the economy is "fundamentally sound." Rosengren, a voter this year on the Federal Open Market Committee, made his remarks eight days before the FOMC is scheduled to meet to voice officials' views on the economy and set the benchmark federal funds rate. Some policy makers have said they do not anticipate a move, and investors put the chance of an April rate hike at zero. In fact, market participants do not expect another rate increase until next year.
The Reserve Bank of Australia voiced its discontent with the Australian Dollar's recent appreciation, which puts economy's' transition towards non-mining activity at risk. The Aussie Dollar has gained more than 12% in the past three months, and is the best performer after Canada's namesake among a group of 10 major currencies, supported by lower expectations of US monetary policy tightening and recovering commodity prices. However, RBA policy makers noted that "the recent rebound in commodity prices, even if sustained, was unlikely to lead to any material change in mining investment over the next couple of years." The central bank, in minutes of its April 5 meeting where interest rates were left unchanged at a record-low 2%, said that persistently low inflation would provide room to ease monetary policy further, in case a necessity arises. The RBA noted the economy's 3% growth in 2015 was better than expected and "broadly consistent" with last year's strengthened jobs market. It said recent information suggested the economy "had continued to grow at a moderate pace" in early 2016. The RBA meeting minutes stated that the bank expected inflation in Australia to remain low over the next year or two, partly due to the impact of the highest exchange rate. A growing number of economists think the RBA will remain on hold throughout 2016.
Upcoming fundamentals: Germany's economic expectations to rise in April
EUR/USD's advance contained by weekly PP
As expected, EUR/USD's development, prior to the ECB event later on Thursday, remained relatively calm on April 18. Yesterday the added value amounted to only 12 pips, while the similar situation being observed on early Tuesday morning. We see the weekly pivot as the first noticeable resistance at 1.1327 and in the short-term the pair is likely to terminate around here. We would allow for a medium-term slippage in the direction of 1.12, where the monthly pivot coincides with the 55-day SMA and weekly S1 for the moment.Market sentiment steady for 5 days, orders diminish
Spreads (avg,pip) / Trading volume / Volatility
Average forecast says EUR/USD will trade near 1.12 by July
Meanwhile, traders, who were asked regarding their longer-term views on EUR/USD between March 19 and April 19 expect, on average, to see the currency pair around 1.12 by the end of July. Though 58% (+2%) of participants believe the exchange rate will be generally below this important level in ninety days, with 42% alone seeing it below 1.08. Alongside, only 24% (+1%) of those surveyed reckon the price will trade in the range between 1.12 and 1.18 on July 31.