Australian Dollar Outlook - 24 January 2012
Bell FX Currency Outlook:
The AUD has risen to a 3 month high overnight, hitting USD 1.0570, as renewed optimism out of the European
region sees an increase in demand for the riskier AUD.
Australia: Despite an agreement yet to be reached between Greece and the private sector creditors, comments from the some of the regions finance ministers confirmed that an agreement was "taking shape", which gave investors hope that all will be rectified shortly.
As a result, the EUR/USD has risen back above USD1.3000 and has taken the AUD up for the ride. Currently the AUD is trading at USD1.0530. Yesterday during our local session the Producers Price Index (PPI) figures were released which came in lower than expected.
Markets were expecting a rise of 0.4% over the fourth quarter, with results actually coming in just below that
at 0.3%. The annual rate was up to 2.9% for the year. While there is only very little correlation between the CPI and the PPI, many believe this could indicate an overall down trend in inflation.
All investors will be watching for the CPI results due out on Wednesday which will give further guidance as to the next move by the RBA come February.
Expect a fairly lacklustre session today with no local data to be released and the Chinese markets still shut for their Chinese New Year celebrations.
Majors: As mentioned above, comments from France's finance minister and some oversubscribed bond auctions in France, Germany and Slovenia were the main catalyst for the overnight rally. Many investors are continuing to wait for an agreement between Greece and their private sector creditors, and news from French Minister Francois Baroin that the deal was 'taking shape' injected confidence to the market. Greece which doesn't have enough money to meet its bond re-payments which are due in March is try to convince its creditors to swap their current bonds for longer term debt. This as well as the increased demand for the sovereign debt auctions overnight has reassured the markets that progress is being made in the ailing region.
It seemed like the currencies were the big winner overnight, as the equity markets in the US were broadly unchanged and in Europe only small gains were seen.
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