Australian Dollar Outlook - 14 June 2013
The Australian dollar breached its highest point in a week in tumultuous markets overnight, with the US Federal Reserve looking less likely to wind back its economic stimulus program.
Australia: This morning the AUD is trading above USD 0.9600 which is well up from 0.9475 yesterday. So what happened? Speculation about the
possible tapering of the Federal Reserve's asset purchase program was the main factor driving the AUD and share markets higher.
The Fed may not be as eager to taper asset purchases as was suggested, which is good for "risk assets" and negative for the USD. Uncertainty and confusion extended in early New York trading as a reporter, believed to be well connected to US Federal Reserve officials, wrote that investors had overreacted to signals that quantitative easing would be tapered shortly.
Earlier in the week when the AUD traded below 0.9400, the predominant talk was the AUD was heading to 0.9000. The recovery since the mid-week low of 0.9326, now a full 3.5%, may be changing that attitude more broadly.
There is no local data today but attention is in any event likely to be centered on whether Japanese markets can find some relief from this
week's falls. No local data but another very heavy US data calendar tonight. For the AUD, we believe any rallies towards parity are opportunity
to buy USD. The currency's position above parity seems to have been broken.
Majors: As stated above, there was significant volatility in foreign exchange markets again with many of the previous night's positions reversed. US equities traded higher throughout the session to finish up over 1%, but US Treasuries rallied.
Oil prices strengthened and the spot iron ore price rose 1% in the first session back from China's three day public holiday. In the US, retail sales rose in May and weekly initial jobless claims were also better. Volatility continued as markets adjusted to very large falls in Asian equity markets yesterday, led by Japan's Nikkei.
Today's Asian session is likely to be messy with all eyes on the Nikkei and USD/Asia exchange rates. Recent volatility is likely to continue with
tapering expectations talk, worries about Chinese growth and uncertainty over Abenomics. Data flow tonight includes producer prices, industrial
production, monthly capital flows, Q1 current account and probably most important, the preliminary Michigan Consumer Sentiment Index.
Economic Calendar
14 JUNE JN Bank of Japan May 21-22 meeting minutes
EU Euro-Zone CPI MoM May
US Industrial Production May
US U. of Michigan Confidence Jun