Bell FX Currency Outlook: Weakness in the AUD continues as US economic figures disappoint.

Australia: The Australian dollar continued to drift lower in the US session, despite weakness seen in the US dollar. The local unit fell to a low just above 1.0400 against the Greenback as concerns over a potential rate cut next week have started to creep in.

Weaker domestic data of late has seen investors start to price in a cut when the RBA meet on February 5th. Strong demand for the EUR off the back of weaker than expected US GDP growth saw the US dollar and various crosses lose ground in the US session.

The AUD and NZD in particular gave up ground, with the AUDEUR cross now challenging lows not seen since May last year. Moves in the AUDUSD are very much now being driven by moves in the AUDEUR cross.

Speculation that foreign asset managers are continuing to liquidate holdings of Australian government bonds could be exposing the Australian dollar to further downside risk in coming weeks.

The NZD recouped some ground this morning as the RBNZ left interest rates unchanged at 2.5%, with the bank more positive on global growth. In an unusual step domestically, Prime Minister Julia Gillard announced yesterday that the general election will be held seven and a half months early on September 14 this year.

The Prime Minister has said the early announcement reflects the government's desire for Parliament to run the full three year term.

Today domestically will see Private sector credit and Q4 import prices released at 11:30am. Figures could have some bearing on the RBA's forthcoming February 5th rate decision.

Majors: It was a choppy night of trade in equity markets as weaker US GDP weighed on sentiment, and US dollar weakness supported commodity markets.

The US economy contracted for the first time since the 2008/09 recession with GDP for Q4 falling 0.1% to 1.1% q/q. US equity markets pulled back after the FOMC announced in its latest statement overnight that US economic growth had stalled but indicated the pullback was likely temporary.

The Fed repeated its pledge to keep purchasing securities till unemployment improves substantially and is back below 6.5%.

Both the S&P 500 and DJIA declined 0.1% to 1,506 and 13/934. European equities were also weaker with the German DAX declining 0.5% to 7,811 and the FTSE decreased 0.3% to 6,323.

Oil prices found support overnight as US Non-Farm employment figures were better than expected, although gains were quickly retraced. WTI futures ended 0.3% higher at USD 97.9 per barrel and Brent rose 0.5% to USD 115.0 per barrel.

Gold prices also rose ending 0.9% higher at USD 1,668 per ounce. Metals and commodity prices found support alongside US dollar weakness and news the FOMC will extend its bond-buying program ending the session mostly higher.
Economic Calendar
31 JAN AU Dec Private Sector Credit
AU Q4 Dec import/export index
EU Jan CPI
US Initial jobless claims
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