Australian Dollar Outlook - 07 August 2014
Bell FX Currency Outlook: The Australian Dollar is slightly higher this morning and we look to local employment data today for some direction from here.
Australia: In currency markets, the USD floundered with little fundamental news to provide any direction. This helped the AUD and Emerging Markets's currencies recover some of their recent losses, however it did not provide for broad based USD selling.
The EUR finished the session flat as data there disappointed expectations, while the weaker IP data in the UK drove the GBP lower. Risk aversion rose marginally in Europe as news of Russian troop buildups helped gold and kept European stock markets weak, however it had little discernible impact on FX markets.
For the AUD, we look to today's Australian labour market data for July at 11:30AEST. Most are expecting employment to have increased by 15K in
July and the unemployment rate remaining unchanged at 6.0%, after edging up in June. With little data out in the US to drive the USD story the
AUD will be sensitive to a squeeze on a good number and the markets continue to view this as another opportunity to sell the AUD.
Majors: Rising geopolitical tensions dominate mood. Last night it was the Polish PM Tusk who warned of a growing risk of a Russian invasion of the
Ukraine.
US Treasuries rallied in the long end, while core European yields fell more sharply. US equities recovered early losses to finish broadly
unchanged, but European equities were dragged lower with the contraction in Q2 Italian GDP also weighing on sentiment in Europe.
The 0.2% q/q drop in Italian Q2 GDP confirmed Europe's fourth largest economy ended the first half of 2014 in recession. Overall, the Italian
economy has been struggling for some time. It has contracted by over 9% from its Q3 2007 peak and is the same size as it was back in mid-
2000. Apart from the positive growth in recorded in Q4 2013, the Italian economy has contracted in every quarter since Q3 2011.
In the US, the trade deficit narrowed in June, almost entirely driven by a decline in imports. The deficit was lower than assumed in the preliminary estimate for Q2 GDP implying the trade sector contributed more to GDP growth than initially estimated. In offshore markets the focus will be on the ECB and BoE policy meetings.
Economic Calendar
07 AUG QVNZ House Prices YoY Jul
AU Unemployment/Participation Rate Jul
UK BOE Asset Purchase Target Aug
EC ECB Main Refinancing Rate Aug
For the latest pricing, ranges visit www.bellpotter.com.au