Australian Dollar Outlook - 07 January 2013
Bell FX Currency Outlook: The Australian Dollar briefly touched below 1.0400 on Friday night but recovered as the US non-farm payrolls for December met expectations.
Australia: With 155k new jobs created this month the unemployment rate remained unchanged at 7.8% while last month's jobs figures were revised upward by 15k to 161k new jobs. This helped equity markets to continue their strong showing over the last several days ever since the fiscal cliff issue in the US was resolved.
Although the deadline on raising the US national ceiling of US$16.4 trillion which must be done by the end of February still looms, major indices in both Europe and the US were higher with the US S&P 500 reaching its highest level in 5 years.
The CBOE Volatility index fell 40% in the last four trading days and is at its lowest level since August, 2012. Better services sector data from the US also helped the "risk-on" mentality which helped the AUD regain its relatively firm tone.
This week in Australia we will see trade balance data for November on Tuesday followed by retail sales on Wednesday and
building and construction figures on Thursday.
Majors: After the release of the US FOMC minutes on Thursday there is more speculation after several Federal Reserve Presidents spoke out that the QE3 program of monthly purchases of US Treasury securities (US$45bio) and mortgage backed securities (US$40bio) may end before the end of 2013 if the US economy continues to improve.
If unemployment reduces from its current level (7.8%) to 7.1%, the QE3 program will most likely terminate although the zero interest rate policy will see no change until we see an unemployment rate of 6.5% as long as inflation stays below the 2.5% level.
Gold reacted to this possibility falling over US$30 at one stage but finishing at US$1,656 an ounce as the USD maintained its relative strength.
The USD touched a 29 month high versus the JPY as the new Japanese prime minister vowed to further ease monetary policy in the future. PMI data in the UK was weaker then expected in December (48.9) indicating contraction after last month's figure (50.2). In Germany the figure improved from last month.
On Thursday, both the ECB and the Bank of England hold their monthly meeting but no change in their respective monetary policies are expected.
Economic Calendar
7 JAN JP Monetary Base y/y
CH Foreign Currency Reserves
GB Halifax HPI m/m
EU Sentix Investor Confidence
EU PPI m/m
Please speak with Bell Foreign Exchange if you require latest pricing and ranges: www.bellpotter.com.au