Australian Dollar Outlook - 27 January 2012
Bell FX Currency Outlook:
The Australian dollar has opened above USD1.0600 against the Greenback this morning after hitting a three month high of USD1.0688 overnight.
Australia: The currency jumped more than one cent early Thursday as the US Federal Reserve announced it would keep US interest rates low until at least 2014, prompting a broad based USD sell off. The AUD rose against the major crosses, with the AUD/GBP touching a new 27-year high above GBP0.6800 before paring some gains.
The AUD/EUR is also back above EUR0.8100. European equities rallied, buoyed by the FOMC statement with the FTSE 100 up 1.3% at 5795 and the German DAX up 1.8% to close at 6540. US equities pared back gains on weaker housing data and the dovish statement.
The S&P 500 was down 0.7% at 1370 while the Dow Jones fell 0.3% to 12723. Today will see Japanese prices and retail trade data due for December. The Australian dollar whilst resilient seems to be pricing out a lot of bad news around the world. With problems in Europe not going away and the chance for a potential rate cut next week the currency could well be topping out.
Majors: The FOMC caught the market by surprise and painted a picture that is not as rosy as recent sentiment would suggest. The FOMC expect to keep the fed funds rate "exceptionally low" until at least 2014. Fed Reserve Chairmen Ben Bernanke said in the press conference that the recovery needs to broaden beyond the manufacturing sector into the depressed housing sector for the recovery to be judged as being sustainable and to head off further policy easing. It seems QE3 could very well be on the cards.
New home sales and jobs data released for the US disappointed slightly, whilst core durable goods beat an expected 0.9% forecast at 2.1%. Oil continued to climb with WTI closing 0.4% higher at USD99.78. Gold also posted gains supported by the weaker US dollar to finish up 0.6% at USD 1,721 an ounce.
Economic Calendar
27 JAN NZ Imports / Exports DEC
CH MNI Business Condition Survey JAN
US Personal Consumption Q4