Australian dollar outlook 10/2/2011
Australia: The AUD appears to be lacking direction ahead of today's employment data release. Consensus expectations are for an increase of approx. 17.5k in the number of employed, with the unemployment rate expected to remain steady at 5%. After the strong growth in the labour market throughout 2010, another strong result today could see expectations for another RBA interest rate rise brought forward, potentially sparking arally in the AUD.
[Get this delivered to your inbox for FREE. Subscribe to our daily Markets Newsletter.]
After last Friday's Monetary Policy Statement, financial markets began to price inexpectations for a hike in official interest rates around September of this year. A strong result today could see those expectations brought forward to around the middle of the year. On the flip side, a weaker than expected result could spark a sell off in the AUD, however any downside would likely be relatively limited given the ongoing strong demand to buy AUD on dips.
Majors: Federal Reserve Chairman Ben Bernanke's testimony before the House Budget Committee was the main focus for the markets overnight. Mr Bernanke warned that the US economy still faces a long road to recovery, suggesting US interest rates will remain at record low levels for quite some time to come.
Mr Bernanke stated that "with output growth likely to be moderate for a while and with employers still reluctant toadd to their payrolls, it will be several years before the unemployment rate has returned to a more normal level".
The US Federal Reserve has kept its benchmark interestrate at zero to 0.25% since December 2008.
The USD lost ground against most of the other majors on the back of Bernanke's comments. The NZD has dipped a little this morning after the NZ Finance Minister, Bill English, said it was "possible"' the NZ economy slipped into recession in the second half of last year.