Australian Dollar Outlook - 11 September 2014

Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking

Bell FX Currency Outlook: The downward momentum in the AUD continued overnight, following further USD strength, weaker Chinese data earlier in the week and continued weakness in the iron ore price.

Australia: USD strength continued to keep AUD under pressure, losing further ground over the past 24 hours, and overnight hit a new 5 month low of 0.9113 USD early in the European session. Markets continued to price increased uncertainty, particularly amidst further declines in iron ore prices, down 1.2% to $82.20/t. The AUD found some support and recovered to 0.9160 during the US session, but the RBNZ announcement has seen a fall down to 0.9150. Key today for the AUD will be the employment data for August. Yesterday in Australia the consumer confidence data for September saw a 4.6% fall, a poor result after the 3.8% gain in August. Despite very low interest rates and rising asset prices, it seems that rising unemployment and Government discontent are the more dominant factors for consumers.

Majors: GBP found support from a new poll that put the 'No vote' ahead of the 'Yes vote' while EUR found support from stronger French and Spanish industrial releases. EUR/AUD is now trading above where it was when the ECB unveiled their latest policy changes. Bank of England Governor Mark Carney spoke again last night, reiterating that interest rates in the UK could soon be moving higher. On Tuesday night, Carney suggested interest rates could begin to rise by spring next year (Q2), a move that would be consistent with the central bank's forecasts and 2% inflation mandate. This morning, the RBNZ left the cash rate unchanged at 3.5% as expected. The central bank now seems to be in a period of 'monitoring and assessment'. On the currency, the bank reiterated the view that the NZD has yet to adjust materially to lower commodity prices, and its current level remains unjustified and unsustainable. Importantly, the bill track was lowered by 24 to 55 bps, with one full hike taken out this year and another by June next year (i.e. 24bps lower in Q4 2014 and 45bps lower in Q2 2015).

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