Australian Dollar Outlook - 26 July 2013
Bell FX Currency Outlook: The Australian Dollar benefited from a fall in the US Dollar against all currencies in the G-10
basket, after comments suggesting the Fed might not raise rates, even if the unemployment rate falls below 6.5%.
Australia: In currency markets, the USD was weaker following an article from closely watched WSJ Fed writer John Hilsenratha, a noted New York journalist, suggesting the Federal Reserve would keep its bond buying programme unchanged at the August meeting.
In relatively illiquid Northern Hemisphere summer conditions, the comments found markets flat-footed and the trend of the past few days as USD strength reversed quickly. Our AUD found the upper bound of its recent range around 0.9300 while the NZD broke through its short term high to trade above 0.8100 in the wake of the RBNZ's meeting yesterday.
Negative headlines about China's growth prospects weighed on Asian markets yesterday spilling over into substantial declines in European markets early in the overnight session. Plenty of negative corporate news out of Europe, including from
Unilever, Orange and BSF added to the downbeat tone of European stocks.
However, sentiment improved as the day progressed but still the Eurostoxx 600 ended down by 0.5%. For today the AUD has bid tone in early trade and through the day will be driven by USD/JPY and also watching the Shanghai stock market. There is somewhat of a drought of significant events and data over the next while to guide market direction.
In Australia, we will have to wait until Tuesday for RBA Governor Glenn Stevens to speak and the release of Building Approvals on the same day.
Majors USD/JPY was lower to below 99.00 with other major currencies having similar runs. It was a mixed session in global markets overnight.
US equities closed modestly higher overnight, on the back of a number of positive earnings results, with technology stocks outperforming. European stocks, however, finished in the red, amid weaker earnings results. US Treasuries rallied modestly, while core European bonds were typically weaker.
Commodities are generally weaker with the exception of precious metals and oil. Offshore, Japan has its CPI due today and China has the MNI Business Sentiment indicator, usually eclipsed by the PMI releases. In the US, the Uni of Michigan Consumer Confidence index (Final) is due tonight.
Over the weekend, China's Industrial Profits are out, not usually market moving. Next week will be an important for markets,
with the US Non-farm Payrolls report due on Friday, important for the Fed's decision as to when to begin winding back bond purchases.
Economic Calendar
26 JULY JP Natl CPI Yoy Jun
CH MNI July Business Sentiment Indicator
US U. of Michigan Confidence Jul
CH Industrial profits YTD YoY Jun (Saturday)
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