South Korea Central Bank Signals Inflation Concerns as Oil Prices Surge 
Bank of Japan's Ueda Flags Low Real Interest Rates as Key Factor in Rate Hike Timing 
BOJ Rate Decision in Focus as Yen, Inflation, and Nikkei Hang in Balance 
Paraguay Holds Interest Rate at 5.5% as Inflation Remains Stable Amid Global Uncertainty 
Bank of England Set to Hold Interest Rates as Inflation Risks and Iran War Impact Loom 
The US dollar and bond yields pulled back after some weak US data. Equities remained elevated, though, the DJIA making a fresh record closing high.
We see positive momentum remains intact, 0.7640 the immediate target area.
AUDUSD medium term perspectives: The resilience of US equity markets to the distractions of the Trump administration is a positive backdrop for risk-sensitive AUD. Chinese markets are of course less helpful as the deleveraging push continues, but the uptrend in steel prices suggests the potential for recovery in iron ore prices. The rebound in Australian job creation keeps RBA rate cut talk at bay. But multi-month, we expect the ongoing rise in US interest rates to chip away at AUDUSD, leaving it around 0.73 by Q3.
We expect AUDUSD to decline further through 2017 on skinnier rate differentials and weaker terms of trade profile. Our Dec-17 target remains USD 0.71. By 2Q’18, we forecast AUD to USD0.67; even if the RBA does not deliver easing in 2H’17, two more hikes from the Fed in 2017 will still leave minimal carry support for AUD (refer above chart), which is particularly important given its vulnerability to a turn in China’s momentum or adverse developments in global trade.
