The Australian Dollar has opened at USD 1.0500 this morning after consolidating at this level yesterday.

Australia: The AUD fell to 1.0444 but has rebounded overnight as equity markets strengthened overnight, thanks in main to some better than expected company earning reports and solid economic data releases offshore. Base metals finished higher with copper up 1.3%, aluminium up 1.5% and zinc 0.1% higher. Gold spot hit an overnight high of US$1,499.32 and gold futures are now above US$1,500 per oz. Oil rose on the back of a weaker USD with WTUI Futures closing at USD108.20.

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In Australia yesterday, the RBA Board Minutes were released and showed the Board is still keeping an eye on global inflation in assessing where to from here. It also noted while the high terms of trade and resource investment will boost inflation over time, they (the RBA) are comfortable with current monetary policy setting for the near term.

Australian Treasurer Swan is speaking today on Budget trends in which he is expected to continue his theme of slower rates of growth in nominal GDP and less budget revenues than previously. Today sees the release of the Westpac Leading Index and the Q1 International Trade Price Index and we expect the AUD to hold onto overnight gains and potentially re-test recent highs.

Majors: Overnight equity markets recovered some of its previous day’s losses on better than expected company reporting and economic data, which saw the Dow finish up 0.5% the S&P up 0.6% and the NASDAQ finishing 0.4% higher. Strong earning from Johnson & Johnson, IBM, Intel and Yahoo helped support equity markets.

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The previous day’s announcement by S&P to place the US sovereign credit rating on negative outlook was “reacted to” by US Treasury Secretary Geithner who said there was “no risk” of the US losing its AAA rating and that progress was being made in reducing the deficit. We’ll see….lots of water to go under that bridge. US housing starts reported a rise of 7.2% in March to 549k annualised (up from the 512k in February).

Meanwhile in Europe, the release of the Euro-zone Manufacturing PMI saw a rise to 57.7 in April. This was better than expected, although sovereign debt concerns still weigh on markets as evidence of divergent economic performance of euro zone economies continues to concern.

Economic Calendar: 20 APR

AUST Westpac Leading Index FEB
CH Conference Board Leading Economic Index FEB
UK Bank of England Minutes
GE Producer Price MA

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