RBA Governor's appraisal of the economy a positive one
RBA Governor Stevens gave a broadly positive account of the Australian economy in his appearance before the House of Representatives Standing Committee.
Much of the sentiment was a repeat of earlier commentary in the RBA minutes.
Steven said that the RBA was "pretty content" in regards to current settings of domestic monetary policy and the AUD.
He added that it was hard to say that the exchange rate was "seriously misaligned" with fundamentals.
On global factors, the volatility in financial markets was again highlighted as a risk, but that funding channels had not been impaired.
RISK aversion dominated sentiment on Friday night. The US stockmarket weakened with the Fed's decision to leave interest rates unchanged raising concerns about the impact of slow global growth on US corporate earnings.
The Dow fell 1.7%, the S&P 500 was down 1.6% and the Nasdaq declined 1.4% for the session. This followed weakness in the European session, with the Euro Stoxx down 3.0% and the UK FTSE 100 off 1.3% for the session.
US interest rates fell on diminished risk appetites and as investors pushed out their expectations for a Fed rate hike.
European yields also fell sharply in reaction to the earlier Fed decision, with yields on German 10-year Bunds down 12 basis points to 0.66%.
Australian 10-year Government bond yields were down 9 basis points to 2.77% on Friday afternoon and continued to lose more ground on Friday night.
The first round of Fedspeak, post-FOMC, was mixed.
Fed hawk Lacker said "exceptionally low real rates are unlikely to be appropriate for an economy with persistently strong consumption growth and tightening labor markets." He expected inflation to move towards the 2% inflation target over the medium term.
Fed dove Williams, who voted to remain on hold, said that arguments for patience outweighed those for a hike but would not rule out an October hike.
Meanwhile, moderate Bullard (who votes in 2016) said he argued for a hike, saying that goals had been met and there was no longer justification for an emergency rate.
The US dollar index initially extended its FOMC reaction but rebounded during the London morning and closed in NY about where it was before the FOMC announcement.
The Euro fell from London morning high of 1.1460 to 1.1270 US dollars. Sterling lost ground on US dollar strength and comments from the Bank of England chief economist on the downside risks to inflation. GBP/USD fell from 1.5659 to 1.5514. USD/JPY bounced from 119.06 to 120.25 earlier this morning.
The Aussie dollar was well supported on Friday, however, it retraced those gains on Friday night, to trade at 0.7188 US dollars at the time of writing.
Outperformer NZD initially rose from 0.6360 to a three-week high of 0.6457 US dollars, but then eased to 0.6386. AUD/NZD fell from 1.1330 to 1.1220.
Concerns about the outlook for global economic growth weighed on commodity prices. WTI oil fell US$2.20 to US$44.70 per barrel. The Fed decision to leave rates on hold last week was supportive for gold.
The 35-city average of property prices in China rose 0.3% in August, the fourth consecutive monthly gain, and provide some further positive evidence that the property market is stabilising.
New Zealand: ANZ job ads declined 1.7% in August and have not grown for six consecutive months. It further adds to signs that the labour market and the New Zealand economy is continuing to soften.
ANZ consumer confidence rose 0.9% in September, partially rebounding after a 3.6% fall in the previous month. The index at 110.8 remains comfortably in optimistic territory, but down from recent highs last year.
The US leading index of economic activity rose 0.1% in August, according to the Conference Board.
Although this was slightly below consensus expectations for a 0.2% increase, it followed an upwardly revised unchanged result in July (previously reported as a 0.2% decline).
The leading index has increased in five out of the past six months.