Australian Dollar Outlook 10/12/2011

The Australian dollar continued to trade in the USD 0.9900-1.0000 range overnight, and is currently trading close to USD0.9950.

Australia: Euro strength against the US Dollar is helping to provide some support for the local unit. Yesterday's release of the NAB Business confidence report showed an improvement to -2 in September from -9 in August, while business conditions rose from -2.9 in August to +2.0 in September. Locally today we have the release of the Westpac Consumer Confidence survey results for October and housing finance data for August. Base metals were weaker overnight with copper down 2.7%, zinc down 2.0%, nickel down 2.6% and aluminium and lead finished down 1.2% and 1.0% respectively. Gold ended the session down 0.6% at US$1,660.00 per ounce while oil ended up 0.7% at US$ 85.56 a barrel.

Majors: Equities markets in the US and Europe were little changed overnight with the Dow down 0.1%, the NASDAQ up 0.7% and London down 0.1%. European equities were sold off early in the session as ECB President Trichet said that "Sovereign stress has moved from smaller economies to some of the larger countries. The crisis is systemic and must be tackled decisively." Following those comments other EU, IMF and ECB officials commented that important progress had been made on Greece and that they would get the next tranche of bailout funds, though more spending cuts would be needed in 2013 and 2014. Slovakia has delayed its vote on the EFSF until later in the week due to ongoing divisions within the government. In the US, the NFIB small business optimism index rose to 88.9 in September from 88.1 in August. It is expect that US Treasury secretary Geithner will announce a plan in the near term to address the current mortgage refinancing gridlock, which will be a positive move for US markets.

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