Australian Dollar Outlook - 11/25/2011
Bell FX Currency Outlook:
The Australian dollar traded near a seven week low during yesterday's session as ongoing concerns over the European and US situation weighed.
Australia: The currency dropped to USD0.9665 against the Greenback before climbing back above USD0.9700 late in the session. With US markets closed for Thanksgiving, markets focused on continued headlines out of Europe, with their attention firmly placed on the Sarkozy, Merkel, Monti meeting.
Locally, the makeup of Australian Parliament changed yesterday following the resignation of ALP Speaker Harry Jenkins. He will
be replaced with Liberal MP and Deputy Speaker Peter Slipper. The move gives the Australian Labour Party a 76-73 vote majority.
The change means the government needs three rather than four additional votes to pass legislation and will see less third-party influences on the Government's direction. With another quiet day in terms of data both locally and offshore, it's likely that the AUD will trade in a fairly tight range during our session.
Although an Italian bond auction tonight could see further weakness should the demand not meet expectations.
Majors: After the meeting between the European heads (Merkel, Sarkozy and Monti) last night German chancellor Angela Merkel said she believes the Euro-zone should take steps towards fiscal union, but reiterated her opposition to both the ECB being directed to fight the debt crisis and jointly issue Euro bonds.
The trio also agreed to abstain from making demands on the ECB. Portugal had its credit rating cut by Fitch overnight from BBB to
B+ (I.e. Junk Status.) The country's large fiscal imbalances, high indebtedness across all sectors and adverse macroeconomic outlook mean the sovereign's credit profile is no longer consistent with an investment grade rating were blamed for the downgrade.
Stronger than expected German IFO Business survey surprised markets and boosted European equities in early trade. The index rose 0.2 points at 106.6 with expectations up 0.3 points to 97.3. Risk appetite waned later in the session with the DAX finishing 0.5% lower at 5428 and the FTSE100 falling 0.24% to 5127.57.
Gold was little changed in subdued trading at USD 1,694.33 per ounce with a mixed session for base metals. Copper
and Nickel rose 0.3% while lead, zinc and aluminium fell. Oil prices rose 0.7% to USD 107.78 per barrel supported by larger than expected draws on oil stocks and tensions around Iran's nuclear program.
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