Australian Dollar Outlook - 06/12/2012
Bell FX Currency Outlook: The news of a Spanish bailout boosted the AUD over the long weekend, briefly trading above parity, but it has since retreated back as investors come to the realisation that this is merely a quick fix.
Australia: The AUD is currently trading around USD0.9850 this morning as investors query the details of the deal. Nothing has been released about who will be funding the bailout; the European Stability Mechanism or the European Financial Stability Fund, and whether Spain would need to put up collateral, which could see further sovereign debt issues in the Euro-zone; and spark further contagion fears.
During our local trading session today, we have the release of the NAB business conditions and business confidence survey for May. The NSW 2012 - 2013 Budget will also be released.
It is unlikely that either of these releases will have a large impact on the AUD movements today, as we look to tonight's offshore session for further clarification on the planned bailout.
Majors: The EUR/USD rallied on news of Spain's bailout reaching a high of USD1.2672, but has since come back below USD1.2500 as the viability of the plan comes into question. Spain announced over the weekend that it has agreed to accept up to EUR100bio to recapitilise is banks.
As mentioned above, the structure of the bailout is still in question, and we expect that investors will remain cautious until further clarification is gained. The elections in Greece are also playing a part in the cautious tone that we have been experiencing. While the race is closely contested, the Syriza party is currently leading, and with their plan to renegotiate the terms of Greece's European Union bailout, should they be elected, this would fuel increased dears that the country might eventually leave the euro-zone, re-issue its own currency and potentially de-stabilise markets further.
News out of China over the weekend was positive, with their inflation measure for May coming in lower than was expected. This result has given greater scope for an ease in monetary policy. Activity data for the region posted a better than expected result which has counteracted some of the concerns out of Europe.
Economic Calendar
12 JUNE AU Nab Business Conditions/Confidence
UK Industrial Production
US Monthly Budget Statement
US World Bank releases new global economic forecast