Australian Dollar Outlook 10/14/2011

The AUD has opened this morning trading around the USD1.0180 level after trading down to USD1.0100 overnight.

Australia: It was a volatile session yesterday for the local currency as domestic jobs data surprised on the upside. The Aussie rallied on the news, trading to USD1.0230 briefly, before ending the session lower.

Yesterday's release of Australian employment saw 20,400 positions added with the unemployment rate falling to 5.2%. The data has eased prospects of a rate cut in November although the RBA will likely await Q3 CPI data due later in October. Yesterday's release of the Chinese trade Surplus reported a fall to $14.5b in September from $17.8b in August, slightly weaker than expectations, with export growth coming in at 17.1% down from 24.5%, while imports also slowed to 20.9% from 30.2%, as renewed global financial uncertainty weighs. Today will see the release of Chinese and Indian inflation figures for September with markets looking to the figure for direction. Base metal prices were also lower overnight as the US dollar strengthened. Gold prices fell off the back of the weaker Chinese data to US$1,677.46 an ounce.

Majors:

US equities declined off the back of weaker earnings data from JP Morgan with the Dow ending down 40 points to 11,400 in closing trade. US treasuries bounced off their lows after Slovakia's EFSF vote was passed overnight clearing the way for the facility's expansion and taking some pressure off the euro. Also overnight, US jobless claims were released in line with expectations, falling 1,000 to 404,000.

European equities retreated due to speculation over the possibility of further write-downs to Greek debt and the impact this would have on financial stability in the region. It was reported that German Banks are potentially preparing for losses of up to 60% on their Greek government debt. It was also reported that some large emerging market governments were considering either funding an IMF-run special purpose vehicle (SPV) or lending to the IMF by buying special bonds with China and Brazil showing interest in the plan, which could be used to finance IMF credit lines and prevent financial contagion from the Greek crisis spreading.

Economic Calendar

14OCT U.S. Advance Retail Sales SEPT

U.S. Business Inventories SEPT

CH CPI SEPT

CH PPI SEPT

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