Bell FX Currency Outlook The Australian Dollar has fallen below USD 0.9000 after good US economic data and a Federal Reserve announcement pulled the currency in opposite directions.

Australia: Late last night, the AUD fell to its lowest level since September 2010. It lost ground early in the overnight session when the US Commerce Department reported that the American economy grew 1.7% in the June quarter, above the 1.1% expected by analysts.

A few hours later, the AUD recovered some of this southern movement after the US Federal Reserve said it would keep going with its economic stimulus plan.

The market had been expecting the central bank to start winding down its $US85 billion-amonth bond-purchase program in September and it would be fair to say the market didn't quite know how to take the comments. We feel the AUD stay on a downward trend as long as it appeared likely the Reserve Bank of Australia would keep reducing the cash rate, with the market pretty convinced there'll be an interest rate cut on August 6.

The RBA's cash rate is currently at a record low of 2.75% and the futures market is pricing in whopping a 96% chance it will be cut to 2.5% on Tuesday.

In Australia, there are reports in the press that the government's updated budgetary statement could be released as early as today.

The statement is expected to show that budget deficits are likely to be large in the near-term, although the budget is still forecast to shift back into balance by 2015-16 and into surplus by 2016-17.

Majors Currency markets were fairly choppy overnight. The USD rallied on better-than-expected US GDP data and ADP employment data, only to reverse a few hours later as the FOMC delivered a statement deemed somewhat dovish.

Most major currencies managed gains of varying degrees with the exception of the AUD. The EUR carved out a near-150
pip range, eventually rising to a 6-week high near 1.3350.

Looking ahead, the market will now turn its attention to the release of US payrolls this Friday. With ADP printing on the stronger side of expectations, there is a sense that any post-FOMC weakness in the USD should be used to scale into long positions.

Ahead of meetings of the ECB and BoE tonight, that will likely mean a floor in the USD. In China today, the official Chinese PMI
data is released at 11:00AEST.
Economic Calendar
1 AUG AU RP Data Riskmark House prices Jul %
CH Manufacturing PMI Jul
EU ECB Announces Interest Rates Aug
US ISM Manufacturing Jul