Australian Dollar Outlook - 03/19/2012
Bell FX Currency Outlook: The Australian dollar has opened this morning just over 1.0600 after equity markets had a strong run last week and successfully pushed the AUD higher once more.
Australia: The Australian Dollar recovered late in the week after the bounce in the USD earlier last week as US equity markets moved higher on increasing optimism among investors. Also fuelling optimism were positive results on the stress tests done by the US Fed on the major banks, as well as the announcement of share buybacks and dividend increases for major banks such as JP Morgan Chase, Wells Fargo and Bank of America.
Friday's moves in equity markets were small with the S&P 500 advancing 0.1% to maintain its level over 1400 (1,404) while the Dow fell 0.2% to 13,233 after European markets were generally higher with the Euro Stoxx 50 the strongest with a 0.6% gain. China revealed that home prices in February fell in 27 of the 70 cities surveyed.
With home lending policies having been tightened in recent months, Chinese officials want to see prices moderate further after the huge increases of the last several years. We expect the AUD to continue to trade in a modest band early in the week, since there is very little data to be released.
With better equity markets and growing optimism about the economic prospects, especially in the US, we see the AUD maintaining a generally firmer bias. Tomorrow the RBA's minutes from earlier this month will be revealed and later today RBA Governor Stevens is speaking at a Hong Kong conference.
Majors: U.S. CPI figures on February released on Friday were in line with expectations rising 0.4% for the month and 2.9% y-o-y. Industrial production for the month was flat as compared to estimates of a 0.4% improvement although last month's figures were revised upward by that same figure.
The University of Michigan consumer confidence forecast for March is slightly lower (74.3) than the market expected (76). Along with the stronger U.S. equity markets last week US bond yields continue to move higher with the U.S. 10-year bond now yielding 27 bps more than a week ago at 2.29% pa.
Analysts will be paying close attention to several speeches by U.S. Fed members (Killian and Dudley) later today on the US economy and whether the USD will continue to advance.
Economic Calendar
19 MAR AU RBA Governor Stevens Speaks in Hong Kong
EU Euro-Zone Current Account JAN
EU ECB Announces Weekly Bond Purchases
US Fed's Dudley and Killian Speak