Australian Dollar Outlook - 09/27/2011
The AUD has strengthened overnight, opening above USD0.9800, as markets cautiously thought through the possibility the world economy may avoid a global recession.
Australia: The rebound in the AUD came after the late decline at the close of our markets, which saw the AUD get to a low of USD0.9622, after the Asian markets were caught short. The fall was short-lived, as offshore equity markets posted solid gains, with the DOW posting the biggest percentage gain in the month of September.
The DOW was up 2.5% and the S&P500 up 2.3% following the lead from financial stocks which were the best performers up 4.2%. The recovery of the markets came after reports that European policy makers are working on a grand plan to resolve the sovereign debt crisis in Europe.
While little came out of the meeting over the weekend with the Group of the 20 largest economies, markets reacted positively to a report that European officials were actively developing a plan to use funds for the euro-zone bailout facility, to shore
up financially strapped European banks.
A stream of encouraging comments from European Central Bank officials also encouraged investors helping revive appetite for high yielding assets such as the AUD.
On the local front, this week is very quiet in terms of data releases, so it's expected that the AUD will continue to track equity markets as well as overseas developments. What is certain is that the AUD is likely to continue to move in a very volatile manner.
Majors: On top of the optimistic reports regarding the crisis in Europe, Germany had some positive results overnight, but this did little to influence the EUR/USD. It has opened this morning just above USD1.3500, and continues to trade much like the AUD is a very volatile manner.
Many are expecting this will not change until a firm plan has been put into place for Europe's economic recovery. Germany's IFO business survey fell less than markets were expecting; falling from 108.7 to 107.5 in September, better than expectations of a drop to 106.5.
The data is set to continue out of Germany tonight, with their consumer confidence due for release. More positive news, but this time out of the US, as new home sales fell less than expectations in August. While the housing sector in the US continues to
underperform and remain very weak, it does look as though it may have stabilised. We will gauge more on the health of the sector tonight, with US house price data to be released.
Economic Calendar
27 SEPT EC Eurozone M3 Growth AUG
CH Industrial Profits YTD AUG
US Consumer Confidence SEP
US Fed Reserve Member Lockhart Speaks on Economy