Australian Dollar Outlook - 03/21/2012
Bell FX Currency Outlook: The AUD has opened this morning below USD1.0500 after reaching a level above USD1.0600 yesterday after the RBA's March meeting minutes were released.
Australia: It has been an interesting 24 hours for the AUD, after the release of the minutes from the RBA's March meeting were more hawkish in nature, and pushed the AUD up into the low USD1.0600's. Some of the key comments were that the RBA "saw downside risks somewhat less likely to materialise"; "the strength of the AUD reflected foreign demand for Australian government debt", and that they saw "China's growth being generally firm and US growth picking up a little".
The strength of the AUD was short lived after comments from BHP Chairman Jacques Nasser later in the day, where he said that the company saw Chinese steel production "flattening off" and that they might reassess some of the capex plans for a larger port expansion at Port Hedland in conjunction with a nearby iron ore mine.
Commodity prices were generally softer on the back of Nasser's remarks as oil prices slid by over 2% on comments from Saudi Arabia that they were ready to increase supply if there was a shortfall in worldwide production.
WTI finished above US$105 a barrel and Brent crude was still above US$124. Most analysts thought that Nasser's comments were
nothing new since many of the hard commodity prices (iron ore and coal) have softened in recent months. In the short run we expect the AUD could trade into the mid to low 1.0400's where there appears to be good support for the local unit.
Majors: Equity markets overnight were generally lower overnight in light of softer commodity prices and concerns about China's growth prospects and this affected the European markets more so than the US market, with the German DAX declining by 1.4% while the Dow index fell by 0.5% mainly due to weaker commodity and transport shares.
Glencore, the largest commodity supplier in the world, announced terms had been agreed to acquire Viterra Inc. based in Canada but with significant Australian assets for C$6.1bn.
Figures from the US housing market continued to improve overnight with housing starts in February averaging
an annual rate of 698k and new building permits increasing to the best level since October 2008.
Tonight we will see further data on the US housing market with February home sales data being released.
Economic Calendar
21 MAR NZ Current Account Balance 4Q
UK BOE Minutes
US Existing Home Sales FEB