Australian Dollar Outlook - 15 July 2013
Bell FX Currency Outlook: The Australian dollar traded down to just above 0.9000 on Friday night as markets focused on comments from the Chinese finance minister and another US Fed Reserve president on the prospect of a reduction in US
monetary stimulus.
Australia: Weakness in the AUD returned Friday night with our local currency revisiting the low .9000's as it has several times in the last few weeks. In a general quiet night of trading for most financial markets, the AUD came under pressure after Lou Jiwei (Finance Minister) said economic growth in China could average 7% in 2013 and that the country could live with a figure of even 6.5%.
This comment along with the US Federal Reserve (Philadelphia) President Plosser's opinion that tapering by the US Fed should begin in September and by result raise US interest rates from their current levels sent the AUD lower. This week we will see the release of a lot of data from all the major economies of the world.
Today all eyes will be on China's GDP figures for the June quarter that will be released at 12 noon AEST which will include June figures for industrial production, retail sales and fixed asset investment as well. With most analysts predicting a 7.5% figure for the last quarter, any lower figure could see the AUD being sold off.
Vehicle sales for June locally will be announced with much of the market's attention then turning to tomorrow's release of the RBA minutes from earlier this month. We expect the central bank will be encouraged by the recent fall in the AUD and will most likely
reiterate that they would be happier if it fell further.
Later in the week we will see import figures, building activity and NAB's business confidence survey. The likelihood of another reduction in our 2.75% cash rate is likely to be confirmed when we see on July 23 the latest CPI numbers. Prime Minister Rudd also announced on Sunday that the fixed carbon price will go to a floating basis as of July 1, 2014.
Majors: All equity markets were subdued on Friday even though two major banks in the US, JP Morgan Chase and Wells Fargo, produced better Q2 results than forecast. The markets shrugged off a credit downgrade to France's debt status and recent US figures were largely in line with expectations (wholesale prices rose 0.8% in June versus a 0.5% forecast and the University of Michigan's consumer confidence index only fell a touch from 84.1 to 83.9 and remains at close to a six year high).
Tonight in the US we will see some retail sale figures and Empire manufacturing data. Fed Reserve Chairman Bernanke will be giving his semiannual testimony to the US Congress on Wednesday and Thursday and his comments will be closely examined for further hints on the timing and size of tapering of future Fed stimulus.
Economic Calendar
15 JULY AU New Motor Vehicle Sales Jun
JN Public Holiday
CH Industrial Production, Retail Sales and Real GDP