Bell FX Currency Outlook: The Australian Dollar retraced during Friday night's trading after China's Q1 GDP data disappointed the market with an increase of 8.1% yoy and has opened in the mid 1.0300's this morning.

Australia: With most analysts predicting a figure around the 8.4% yoy, the AUD fell back quickly to below 1.0400 as the knock on effects of a slowing Chinese economy raised implications for the Australian economy.

The market sees a "soft" landing for China although equity markets weakened in both Europe and the US in response to the announcement.

The broad S&P500 index in the US had its first consecutive weekly loss since last November with a fall of 1.2% on Friday as the Dow was lower by 1.1%, even though some of the early quarterly results from major US companies were higher than forecasted. Earnings from the largest US bank, JP Morgan Chase, beat estimates but their shares fell more than 3% as the market moved into "risk-off" territory again.

In Europe, the sentiment was even more negative as the German DAX fell 2.4% and the Euro Stoxx 50 was 2.6% lower as eyes focused on Spain's high debt position and weak economy. In Australia, eyes will be on the RBA minutes from earlier this month which will be released tomorrow.

The market is predicting a decrease of 25 bps in the cash rate to 4% when the RBA next meets on May 1, although the release of Q1 CPI data later this month may influence the RBA's decision along with the better than expected local unemployment numbers last week.

Majors: During the weekend China announced the first widening of the daily trading band of the renminbi since 2007 from 0.5% to 1%. This may hasten a further rise in the currency over time with some analysts predicting that the currency could rise 3% over the remainder of 2012.

This, of course, will not be enough in the eyes of the US government who firmly believe the currency is 'manipulated'. In the US, CPI figures for March on Friday were in line with predictions (0.3% for the month and 2.7% yoy). In the US tonight we will see retail sales for March and tomorrow industrial production figures for March as well.

These figures along with the large number of earnings announcements for Q1 from major US companies in the next two weeks could influence market sentiment. In Spain, it appears some of their major banks have been big borrowers from the ECB as of late raising further concerns about the health of the Spanish economy.

This has seen the EUR weaken against the USD and the AUDEUR cross rate improve.

Economic Calendar
16 APR US NAHB Housing Market Index APR
US Advance Retail Sales MAR
EC Euro-Zone Trade Balance FEB
US Empire Manufacturing APR