Australian Dollar Outlook - 03/26/2012
Bell FX Currency Outlook: The Australian dollar has started the week in the mid 1.0400's after its tumble last week to a monthly low below 1.0350.
Australia: The AUD recovered on Friday after its selloff earlier in the week on weaker than expected flash Chinese PMI data but later this week we will see the release of the official numbers. There was a lack of new data for the market to focus on Friday although the slightly disappointing housing data from the US was largely ignored.
New home sales in February declined by 1.6% after forecasts were made of a 1.3% rise and actual sales were slightly lower than predicted.
We expect the AUD to trade slightly firmer in the next few days although there is not a lot of data due to be released this week in Australia or overseas that is likely to impact our local unit.
The RBA's Financial Stability Review will be released on Wednesday and private sector credit growth is out of Friday.
In Europe, the German IFO Business Survey is due while in the US we will see the latest consumer confidence, income and spending figures.
Locally over the weekend in Queensland, we saw the ruling Labor Party losing government and only retaining 7 out of 89 seats in the Legislative Assembly.
Campbell Newman, the new Premier, has promised to return the state's budget to a surplus by 2014-2015. We see the AUD holding
these gains today but would not be surprised if it were to challenge the downside again this week.
Majors: Equity markets in the major economies were mixed on Friday with the US indices posing small gains while Europe's major indices were mixed.
Energy companies were the best performers as oil prices again rose after further confirmation that the embargo on Iranian oil exports by many Western nations was having an effect on the supply of oil. WTI crude rose to finish just below US$107 a barrel with Brent crude also higher at US$125 a barrel.
On Friday, European finance ministers will meet in Copenhagen to discuss raising the potential size of the bailout funds of the temporary EFSF (European Financial Stability Mechanism) and the permanent ESM (European Stability Mechanism). Concerns are again being raised on the health of the Spanish and Italian economies as bond yields rose last week.
The ESM has EUR500bn has its disposal while the EFSF has EUR192bn of undrawn availability. German opposition to the potential use of both funds has apparently died but we are sure we have not heard the last on this issue.
Economic Calendar
26 MAR UK Nationwide House Prices FEB
EU ECB Announces Weekly Bond Purchases
US Fed's Plosser Speaks on Monetary Policy in Paris
US Fed's Bernanke Speaks to Business Economists