Bell FX Currency Outlook The Australian Dollar has fallen to a fresh 11-month low amid continuing optimism about the US economy and negativity about the Australian economy, before rebounding slightl.

Australia: The AUD dipped ever so briefly below USD 0.9800 in the early hours this morning, a level not seen since June 2012. The AUD's fall this week has been pronounced and despite good old chest beating from some quarters, it was not widely predicted as recently as a week or two ago.

So as we write, the AUD appears out of favor with the market for two main reasons. There are growing expectations the local economy won't perform at its previous stellar levels over the next two years and secondly, the market seems to be starting to believe the US economy is experiencing a genuine recovery.

As has happened many times since our AUD floated, there could be a relief rally at any time but the sense is long
term it is starting a push lower.

For today, we would not be surprised to see the market testing the downside in what could well be a subdued but choppy day. Short covering/profit taking into this afternoon's close could wind up the week.

Tony Abbot's post Budget reply speech (important because of the strong Coalition standing in opinion polls with the election
just four months away) detailed some new Budget savings and promised to keep the Government's savings announced in Treasurer Wayne Swan's Budget.

There was also a commitment to not shirk the need to return the budget to surplus while also pledging to reduce the corporate tax rate modestly "when affordable". The Opposition will also seek to cut red tape.

Today there is nothing of note being released in Australia

Majors: The USD fell on the latest poor economic statistics but hints of a cut back in the Fed's QE program as early as the US summer from San Francisco's John Williams (not an FOMC voter) saw the USD rebound.

The markets are debating whether the Fed will control the pace of the selloff in US bonds, even if it is cautious about removing QE. In any case, bonds have rallied over the past few days, yields falling from a local high of 1.98% on Wednesday to 1.88%. Ben Bernanke's Economic Outlook next week will probably stress the Fed's current approach in favour of no quick winding back of QE.

NZ has PPI and Capital Goods Prices. US Michigan Consumer Confidence looks likely to be the most relevant event for markets in the next 24 hours, with a moderate bounce forecast. Also in the US, the Leading Index is due and Kocherlakota (NV) is due to speak.
Economic Calendar
17 MAY NZ Producer Prices - Inputs/Outputs 1Q
US U.of Michigan Cobfidence May
US Leading Indicators Apr