Bell FX Currency Outlook: The AUD has opened below USD1.0700 this morning, currently trading at USD1.0670, as a downgrade in Chinese growth forecast sees a fall in commodity prices that could also result to a decline in the value of the AUD.

Australia: Equity markets across the board were also weaker after the release out of China which saw their 2012 growth forecast downgraded from 8% to an expected 7.5%. Since the Chinese economy is a big consumer of commodities, this sent commodity prices south; gold was down 0.4% to USD1,706.33, Copper was weaker by 0.9%, Nickel down 2.1% and Aluminium weaker by 1.7%.

Soft commodities also felt the pinch. Since the AUD is known as a commodity currency and highly correlated to the movements in commodity prices, this can explain the small correction that we've seen overnight.

This is a big week on the local markets in terms of data releases. Today sees the RBA meet for their interest rate decision, due to be handed down at 2:30pm (AEDT).

It is expected that the cash rate will remain on hold today, given the commentary from the RBA's last meeting, stating that they were comfortable with the current policy stance; especially given that domestic data continues to improve and the overseas tensions have subsided in the last few weeks.

Should any of the comments indicate that this is not the case, then we could see a reaction in the AUD. Markets will then be looking forward to the 4th quarter GDP data which is due to be released on Thursday.

It is expected that the GDP result will show a slowing in Australia's growth, posting a result of 0.7% after September's 1% growth. This estimate is weaker than expectations andcould provide a catalyst for the AUD's long awaited correction back towards USD1.0500.

Majors: As mentioned above, during the Chinese Premier Wen's annual report to the National People's Congress, he reduced the growth
expectations for the region in 2012, and stated that the authorities are committed in moving towards are more balanced growth model.

Despite the positive news that they expected their fiscal deficit to decrease from 2% of GDP to 1.5%, the reduction in the expected growth did put a dampener on markets.

US equity markets were weaker; the DOW was down 0.1% and the S&P500 down 0.3%.

This was despite the continued positive data to come out of the region. The US ISM non-manufacturing index for February posted a result better than the markets were expecting, with a rise of 0.5pts to 57.3. This continues the trend of better than expected manufacturing figures that has been experienced in recent months.

Economic Calendar
6 MAR AU Current Account
AU RBA Cash Target
AU Net exports of GDP
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