Australian Dollar Outlook - 05/07/2012
Bell FX Currency Outlook: A disappointing non-farm payroll number from the US for April saw major equity markets move lower on Friday and take the Australia dollar with it to the mid 1.0100 level this morning.
Australia: The AUD has fallen after the financial markets have gone again into the "risk-off" mode after non-farm jobs in the US rose by only 115k for last month against expectations of a rise of 175k and the results of the French and Greek elections raised uncertainty in investors' minds.
Although the US unemployment rate fell to 8.1% from 8.2%, this was caused by a fall in the participation rate which indicates that a lot of
workers have become discouraged with their job prospects and have stopped looking for work.
Somewhat more encouraging were upward revisions of 53k to the previous two months numbers. Although in isolation this number is discouraging we still believe a modest recovery in the US is continuing.
European equity markets fell with the German DAXdown by 2% and the major indices in the US also tumbled as well with the NASDAQ down by 2.2% as was the Dow (-1.3%) and S&P500 (-1.6%).
We have a slew of data this week in Australia beginning today with ANZ job ads, construction, building approval and retail sales data followed tomorrow by the announcement of the federal budget for 2012-13 which is to include a small surplus for next financial year. Later in the week there will be trade data for March (Wednesday) and unemployment data (Thursday) as well as a variety of announcements on the Chinese economy. We expect a volatile week for the AUD.
Majors: In France, President Sarkozy has lost to the Socialist candidate Hollande by a 4% margin (52% to 48%). Francoise Hollande is the first Socialist president since 1981 and he has been a strong critic of the austerity programs driven by the Germans in the Eurozone. Hollande's views of preferring the European Central Bank to be more aggressive and consider the issue of joint Eurobonds rather than look at continuing and more severe austerity measures will likely put him on a collision course with German Chancellor Merkel.
This has seen the EUR move below 1.3000 versus the USD this morning. Adding to the weakness of the EUR was the uncertainty whether a majority coalition government could be formed in Greece after exit polls revealed a major swing to anti-bailout and
anti-austerity candidates.
We would expect to see much higher volatility in the EUR over the coming weeks and the AUDEUR should hold its relative value and possibly move slightly higher over the coming weeks. UK markets are closed today for the May bank holiday.
Economic Calendar
7 MAY AU ANZ Job Advertisements APR
AU Building Approvals MAR
AU NAB Business Confidence APR
AU Retail Sales MAR