Australian Dollar Outlook - 07/16/2012
Bell FX Currency Outlook: The Australian Dollar has opened above 1.0200 following Friday's Chinese Q2 GDP data and rallying equity markets Friday night.
Australia: GDP growth in China for Q2 came in at 7.6% y-o-y versus the 8.1% y-o-y that in Q1. With some fearing that the figure might have been weaker, financial markets breathed a sigh of relief that growth in China is only moderating "slightly".
It is expected over coming months there will be more stimulatory measures in China to encourage growth and theireconomy will see a further pickup in the second half of 2012.
There is still a general perception in financial markets the US Federal Reserve will introduce some form of QE3 later this year and the market will be looking to Chairman's Bernanke comments to Congress later this week for hints of further stimulus.
All commodity prices were up on Friday as the "risk-on" sentiment pervaded the financial markets. With major European indices all higher led by the German DAX that was up 2.1%, this trend continued into the US after JPMorgan Chase reported Q2 results and said their full year earnings for calendar 2012 would be a record.
They also stated the trading losses from their CIO unit were US$4.4bn, which was lower than many analysts were predicting and helped propel their shares upwards by 6% on the day and push most major bank shares up as well.
The Dow had a strong day up by 1.6% to 12,777 with the S&P 500 and NASDAQ also moving higher. With many Q2 earnings results being released this week there is a growing feeling they may be better on average than the 5% increase predicted for the wider S&P 500 index for the quarter.
In Australia, we will see the release tomorrow of the RBA's minutes from their meeting earlier this month along with new vehicle auto sales for June.
Majors: On Friday US producer prices rose more in June than expected (up 0.1%) where the market was predicting a decline of 0.4%. Much of this was due to the continued rise in US food prices as the drought gripping the Midwest of the US extended its reach.
Also on Friday the Bank of England released its Funding for Lending Scheme (FLS) which is meant to encourage banks to lend more funds into the market over the next four years.
It is scheduled to begin on August 1 and run for four years allowing banks and building societies to borrow at fees between 1.50% and 0.25% against suitable collateral.
As we know, major banks have been sitting on massive amounts of liquidity over the last several years and have been hesitant to increase loan growth in light of the uncertain nature of all financial markets and the general lack of confidence.Japan is closed for a public holiday today and tonight in the US we will see retail sales for June.
Economic Calendar
16 JULY NZ Performances Services Index JUN
EC Euro-Zone CPI JUN
US Empire Manufacturing JUL
US Advance Retail Sales JUN