Bell FX Currency Outlook: The Australian Dollar is steady after a night of heightened volatility in currency markets thinned by the Northern Hemisphere summer.

Australia: The US Dollar rallied strongly on better-than-expected US jobless claims data but then reversed as US capital flows data suggested historically large portfolio outflows for June and as the gold price rallied.

The moves were evident across all currencies. The AUD fell from 0.9180 to a low of 0.9058 on the claims data and then reversed to current levels of 0.9150 this morning. In similar moves, the G4 currency pairs all carved out ranges of around 150 pips.

The GBP finished the strongest, aided by stronger-than-expected UK retail sales data. The JPY was also a net beneficiary of the volatility, presumably strengthening as markets become increasingly sceptical of the waning political momentum behind Prime
Minister Abe's reform agenda.

Today, the markets will likely attempt to consolidate these moves, but also make sense of the US capital flows data, which appear somewhat at odds with the consensus around the movement of capital following the US Federal Reserve's announcement of tapering in May.

In Australia today, RBA Assistant Governor Debelle will be speaking on "The Impact of Payments System and Prudential Reforms
on the RBA's Provision of Liquidity" at 11:30AEST.

Today, we anticipate a day of consolidation and would note a lot of AUD buying interest associated with the rise in metals prices, notably iron ore, which has risen by 10%, to above $140 a tonne since the beginning of August. However, the risk for the AUD looking forward is lower, as the Fed's tapering decision approaches.

Majors: The volatility in the USD today reflects uncertainty about the outlook for the US economy. While tapering by the Federal Reserve is inevitable, the latest US economic reports make investors wonder if the central bank is acting prematurely" in moving toward a reduction of its stimulus program.

Oil prices were mixed overnight and spot gold rose 2.1% overnight to due to weakness in the USD. Base metals prices were mixed overnight whilst agricultural commodities prices were mostly higher.

Overnight, the key interest will be in the Michigan Consumer Confidence preliminary release for August. US building permits and starts are also due. The EC has its trade balance and CPI.
Economic Calendar
16 AUG AU RBA Assistant Governor Debelle speaks
EZ Current Account June
US Building Permits, Housing Starts & UoM Confidence
CH Property Prices July

For the latest pricing, ranges, visit www.bellpotter.com.au