Australian Dollar Outlook - 04 April 2013
Bell FX, IG Markets Currency Outlook: The Australian Dollar is trading near USD 1.0450 after a mixed session overnight. The AUDEUR will be closely watched today as local retail sales, a good measure of returning consumer confidence, has been estimated to kick 2.5 per cent higher and should provide more traction to the AUD.
Australia: The AUD was well bid during trading offshore as the markets continued to react positively to Tuesday's Reserve Bank of Australia's decision to keep the cash rate at 3 per cent on Tuesday, Bell FX analyst Claudine Connolly said in a note to investors.
Ms Connoly echoes the statement of other analysts in saying that with interest rates remaining on hold in the period ahead, the effects will hopefully start flowing into the economy.
"Despite our low interest rate settings, the reality remains that Australia's higher interest rates is providing carry trade activity still and this helps explain the stubbornly high currency," she explained.
US stocks posted healthy declines during the Wall Street session but this did not translate to a weaker AUD, as have happened often in the past. The correlation of weak commodities to the AUD has not been felt, but analysts have warned that the price declines of commodity prices may strongly be felt in the local currency markets.
"The news from last night saw commodities drop like a stone with copper off 1.4%, nickel down 1.62% and silver sinking 1.7%. Taking a look at silver's chart, and it appears to be in an almost perfect bear market. Gold is faring even worse, with June futures falling 1.4% to a settlement price of $1553.50, that is an 18% decline since the high of $1891 back in August last year, and is now only 2% off the 20% benchmark for an official bear market. Newcrest and the like are in for another day of riding the elevator," noted Mr. Evan Lucas, market strategist with IG Markets.
Mr. Lucas said the EURAUD is the other pair to watch today, as markets test the recent low of $1.222. Later tonight is the ECB press conference, and after several weeks of turmoil, watch for easing and dovish sentiment from Mr Mario Draghi which will push the EUR lower, and this pair could be push lower again.
"Australian retail sale figures are expected to jump up 0.3%, while building approvals are anticipated to excel by adding 2.5% and should push the Aussie dollar higher," he added.
Majors: Equity markets lost ground overnight, as did and commodities, most notably oil which is down 3% after the weekly EIA report showed US crude inventories rose to a 22-year high last week.
US jobs and services data both came in below expectations. The US ADP employment report showed a 158K increase in March and although
February was revised higher by 39K to 237K, it does point to some downside risk to the market's 195K forecast for non-farm payrolls on Friday night.
Meanwhile the ISM non-manufacturing is still showing expansion but fell by more than expected in March to 54.4 (median 55.5) from 56.0 in February.
The EUR was a beneficiary of the less optimistic view of the US, rising from 1.2800 to sit near 1.2850. The GBP also strengthened despite a soft UK PMI construction number (47.2 vs. 48.0 expected).
Today, all eyes will be on the Bank of Japan, which concludes its first meeting with its new Governor this afternoon, and if markets are dissatisfied, the recent pull-back in the USD/JPY will continue.
Economic Calendar
04 APR AU Feb Retail Sales
JN Apr BOJ Target
UK Apr BOE announces rates
EU Apr ECB announces Interest Rates
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