Bell FX Currency Outlook

The AUD has had a strong rally overnight, trading through parity on renewed investor confidence and demand for higher yieldingcurrencies such as the AUD.

Australia: As we mentioned yesterday, news that German's Chancellor Merkel and French President Sarkozy have committed to finding a solution for Greece and the Euro-zone provided a much needed boost to the markets. Europe and US markets, while experienced very thin trading due to the holidays in the US and Japan, were able to digest the announcement and attempt to gain more information on what they are likely to propose.

While it seems that this recent rally in our local currency is purely based on speculation, the reaction in the markets overnight shows that investors have been seeking some good news to grasp a hold on. Now all we need is to see some real action.

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The debt crisis meeting between the European leaders has been postponed for a week (now Oct 23rd), but many are hoping that this is because they would like to get a workable solution that all will agree on.

However, the longer that this uncertainty persists, the more intense the risks are to a global economy which is already suffering from weaker growth and a near-incalculable overhang of debt.

Locally today we have the NAB Business Survey released which includes business conditions and business confidence for
September. Last month we experienced a sharp drop in the readings, mainly due to the continuing financial market instability and economists are divided as to what to expect today.

While the drop in the AUD could prove to be positive for many sectors, it's unsure whether it will be enough to offset the uncertainty of the global economy.

Majors: The news out of Europe overnight was all positive. Not only regarding the plan between Germany and France, but also some regional data releases and confirmation that France had retained their AAA rating.

Industrial production in Italy was up 4.3%, well above the market expectation of 0.6% gain. France also posted an impressive result up 0.5% compared to expectations of -0.7%. All of these influenced the EUR/USD which gained 3.5cents; its largest one day surge against the USD since July 2010.

Economic Calendar
11 OCT Aust NAB Business Confidence
Euro-zone Industrial Production
US Fed Releases Minutes of Sept FOMC meeting
US Monthly Budget Statement

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