Australian dollar outlook 14/01/2011

Australia: The Australian dollar has opened higher today, as the USD weakened on the back of a worse than expected US Labour report released overnight. It was a choppy session for the AUD yesterday after a mixed Aussie employment report caught the market off guard.

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The AUD lost nearly half a US cent after it was reported that employment had only risen 2.3k in December, the market had been expecting a rise of 25k. However the unemployment rate fell to 5.0% from 5.2% the previous month. The AUD slowly regained the lost ground throughout the day eventually settling around USD0.9950 at the end of the local trading day.

Offshore we saw it a high of USD1.0020 before retreating back towards USD0.9980. With no local data releases scheduled today in Australia, the market will focus on tonight’s offshore session with US retail sales and December inflation figures being released.

Majors: The USD was sold off against of its major rivals overnight after a government report found more people had applied for unemployment benefits in the US last week. The Labour department said first-time applications for unemployment benefits rose 35k from the week before, its highest level since October and above economists’ forecasts. The data overshadowed some of the other dollar-positive reports, including the increase in the Producer Price Index. The USD sell-off saw the EUR regain the $1.32 level and we saw the AUD briefly back above parity. The ECB and BoE both keep interest rates on hold as widely expected. It was a mixed night for equity markets as well with European markets broadly stronger after successful debt auctions in Italy and Spain boosted banking shares and eased concerns over the European debt issue. US markets were marginally lower however as weaker than expected jobless claims hampered optimism. Gold and Oil were both lower as were commodity prices.