Bell FX Currency Outlook: The Australian Dollar is just
north of USD 0.9900 after sentiment was boosted
slightly due to supportive comments from policymakers.
Australia: The AUD has rallied by over one US cent in 24 hours which
appears to all and sundry as little more than a rally to cover some recent
short positions. IMM data shows that long USD positions are at record
highs. Concurrently, the Investors Intelligence equity sentiment index has
is as bearish as at any stage last year. Adding to this is that many
commentators are putting the probability of a Greek exit from the Euro at
great than 50%. What to make of this? There has to be a strong chance
that volatility is ever present for a while yet, and if there is a bounce, or fall
in the AUD, based on Greece and sentiment, it could be vigorous either
way. Policy response is going to be really important over the next few
months. Looking at the markets, base metals were mixed overnight while
soft commodities were relatively unchanged with wheat gaining 1.3% on
ongoing concerns over dry weather in the US. Oil finished slightly higher
with trading buoyed by the Chinese Premier's announcement regarding
commitment to growth. There are no economic events scheduled for
Australia. China's PMI for May is due which will be closely studied. It
showed an apparent trough in November last year but has been struggling
to gain traction. The OECD releases its semi-annual Economic Outlook
tonight and is likely to contain analysis and views on the outlook for
Europe. We see the AUD holding last night's gain today but events
offshore hover closely.
Majors: The US Dollar was slightly lower as supportive comments from
policymakers provided support to sentiment. Equities nudged higher on
both sides of the Atlantic but it was a mixed night for government bonds.
10-year yields rose slightly for the US (+2bps) and Germany (+2bps),
while Portugal (+14bps) recorded larger rises. Yields actually fell in
slightly for Greek (-6bps) and Italian (-2bps) government debt. Weekend
comments by Chinese premier Wen suggested China would adopt "a
proactive fiscal policy and a prudent monetary policy" to bolster the
economy. Atlanta Fed president Lockhart (voter), noted that while current
economic conditions in the US didn't require further policy easing by the
Fed, he would consider further quantitative easing if there was a "severe
drop off" in economic activity as a result of the instability in Europe. On the
data front, the US has Existing Home Sales for April. Eurozone Consumer
Confidence might also be a focus in offshore trading today.
Economic Calendar
22 MAY CH HSBC Flash Manufacturing PMI
UK CPI
Fed's Lockhart (VM) Speaks on Monetary Policy
US Existing Home Sales