Australian dollar outlook 20/1/2011
Australia:
The Australian dollar rose to a 2-week high against theUSD yesterday before a relatively weak consumerconfidence report turned the AUD lower again.
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TheWestpac Banking Corp and the Melbourne Instituteconsumer sentiment index fell by 5.7% to 104.6 inJanuary, reflecting the concern consumers have over thepotential impact of the Queensland floods.
The AUD's direction today is likely to be driven by the release latertoday of a number of pieces of key Chinese data. Therehas been growing concern of late that the Chinese mayhave to increase official interest rates to reign ininflationary pressures.
Such a move could cause Chineseeconomic growth to come off sharply and impact onAustralia's exports. In terms of the data due for releasetoday, economists are expecting GDP to have grown by9.4% in the fourth quarter bringing full year growth to10.2%, while inflation is expected to come in at around4.6% in December from 5.1% in November.
Expect somevolatility in the AUD around the time of the data release.
Majors:
Equity markets were generally lower overnight after someUS corporate earnings releases disappointed.
GoldmanSachs and American Express released some poorearnings reports sparking a sell off in the Dow, which thenlead to a sell off in the European markets.
DisappointingUS housing data added to the overall negative tone of themarket. Housing starts fell 4.3% in December, coming inwell below market expectations.
The USD subsequentlylost ground, helping the EUR reach it's highest levelagainst the Greenback in 2 months.
Any gains in the EURare likely to remain capped in the short term as rumourspersist that Portugal will be forced to seek an economicbailout similar to those already extended to Ireland andGreece.