Bell FX Currency Outlook: The Australian Dollar has opened this week above 0.9000 as US new home sales for July fell well short of expectations.

Australia: The USD retreated from its recent strength versus the AUD as new home sales for last month fell 13.4% to a level of 394k which was the largest decline since May, 2010 and the lowest figure since October, 2010.

With such a weak number the question on the timing of bond purchases by the US Federal Reserve came once again to the forefront. Most economists still expect the tapering to begin next month but these figures lowered the USD as bond yields declined.

With the better than expected Chinese PMI data for manufacturing at the end of last week the AUD has recovered from its quick fall last week after the release of the latest FOMC minutes. There are few data releases this week in Australia but the major
one appears to be Thursday's release of capex figures for Q2 which follows Wednesday's announcement on construction work done for Q2.

With the mining boom slowing all eyes will be on the result to as a hint on how the local economy is adjusting and the early effects a lower AUD might have on the overall result. Industrial profits from China for last month will be out tomorrow although we expect that to not influence the AUD and general market to any great extent.

Majors: The US new home sales data was a dampener for the USD although major equity indices on both sides of the Atlantic were modestly stronger on Friday.

Microsoft's shares rose almost 6% after CEO Steve Ballmer announced his retirement. With last month's disappointing home sales figures along with a revision downward of June's initial figures, the USD retreated modestly against all the major currencies.

The US Kansas City Fed manufacturing index improved to 8 from 6 the previous month.

The central bankers gathering at Jackson Hole, Wyoming produced no exciting announcements as Fed members rejected a coordinated approach with Europe on delaying any future tapering measures.

A meeting of Euro-zone finance over the weekend was also inconclusive as no decision on the future direction of interest rate policy was made. Today we will see some trade figures for New Zealand from July and later tonight in the US durable goods and capital goods figures for July will be released. Today UK markets are closed for a summer bank holiday.
Economic Calendar
19 AUG UK Public Holiday (Summer Bank Holiday)
NZ Trade Balance July
US Durable Goods July
US Dallas Fed Manufacturing Activity Aug

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