Australian dollar outlook 19/1/2011
Australia: The Australian Dollar is trading higher thismorning on the back of better than expected Europeanstocks and a slightly weaker US currency.
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Share marketsin Europe rallied on talk that sovereign debt issues wouldstart to show some improvement, while in China, reportson property prices show they rose less than this time lastyear and this development comes hot on the heels of China's tightened monetary policy announced last week.
We see the AUD trading at USD0.9985 this morning,which is up from USD0.9925 yesterday and indeed since5pm yesterday, the AUD dollar has traded over parityagain. We feel this push higher is a hard slog for the AUD,and expect some correction today. Any news thatsuggests recovery for the global economy is on track willassist though.
Stronger than expected CPI data from theUK and an upbeat German investment sentiment surveyreleased overnight helped boost optimism about the healthof the global economy and lifted investor risk appetite.Westpac consumer sentiment figures, due today, mayprovide further support to the AUD but equally maysurprise on the downside given the first release of datapost Queensland floods.
Majors: EUR/USD rallied strongly on headlines thatRussia is considering buying Spanish debt again but thereis still evidence the debt crisis is far from resolved. GBPcontinues to impress while base metals were mixed andagricultural commodities were stronger.
US equities wereslightly off on lower than expected profit results fromCitigroup and Apple's CEO medical leave announcement.
US Treasuries were sold and the yield curve steepens,longer term inflation concerns saw the difference in yieldsbetween 2-year and 30-year Treasuries widen to thehighest level since Bloomberg started recording data in1977, and this is despite the Federal Reserve purchasingas much as US$21.5bn in debt as part of QE2.
The Bankof Canada left rates unchanged at 1% and upgraded itsgrowth outlook for 2011 and 2012.