Australian Dollar Outlook - 13 February 2014

Bell FX Currency Outlook: The Australian Dollar has once again maintained its firm tone overnight, pushing higher yesterday, as Chinese trade figures exceeded expectations.

Australia: The AUD traded higher again after the release of January's trade figures from China. The AUD jumped from around the USD 0.9000 level when we learned that exports for January increased by 10.6% as compared to consensus predictions of only a 0.1% rise. This was a lot stronger than December's rise of 4.3%. Imports rose strongly as well by 8.3% as compared to forecasts of 4%. These figures pushed the monthly trade surplus to USD31.9bn from the December figure of USD25.4bn and is the second highest trade surplus figure since November, 2012. Some of these figures might have been affected by an earlier start to the Chinese New Year holiday since this year it began on January 31 as compared to last year's holiday which started on February 10. This overshadowed the release of the Westpac-Melbourne Institute's consumer confidence data yesterday which showed a 3% decline in the index. Later this morning we will hear local employment figures where the market is expecting an increase of 15k jobs which would be an improvement on the 22k job losses from last month. The expectation is the unemployment rate will kick up from 5.8% to the 5.9% level. Unless the job numbers are strong we would expect the AUD to take a breather here and consolidate its recent gains.

Majors: The Bank of England raised its growth forecasts for the UK from 2.8% to 3.4% for 2014 and projected unemployment to fall to 7%. Inflation is projected to remain low for the next several years. They also joined the US Fed in providing "forward guidance" on interest rates saying that interest rates would remain low for the foreseeable future since there is good bit of spare capacity in the UK economy. The market is projecting the first increase in interest rates not until mid-2015. The EUR was a touch weaker as ECB President Draghi spoke after factory output figures were weaker than expected. The Eurozone's GDP's figures which are to be released on Friday night will be closely reviewed.

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