Bell FX Currency Outlook: The Australian dollar has lost some ground after a weaker-than-expected US economic growth figures drove an earlier rally in the local currency overnight.

Australia: The AUD was trading at USD 0.9270 this morning having climbed to 0.9347 on Wednesday evening before falling back below 0.9300. The rise came after disappointing gross domestic product (GDP) figures out of the US were interpreted by the market as a sign the Federal Reserve may hold off on reining in its economic stimulus program.

News of the possible stimulus wind-back last week saw the AUD fall to its lowest point in almost three years against the surging USD. In Australia overnight, Kevin Rudd became Prime Minister again after a spill of the Australian Labor Party leadership.

A majority of the caucus (57) voted for Kevin Rudd over Julia Gillard (45 votes). The main issue for markets is what this
means for the timing of the election, currently scheduled for 14 September 2013.

Bringing it forward could theoretically support business confidence which anecdotally has been weighed down by political uncertainty and could push back the timing of any future interest rate moves by the RBA.

However, it was the weak figures out of the US rather than Australia's leadership change that drove the AUD higher against the Greenback. The markets will now wait for the release of another batch of US economic data on Thursday night, Australian time, including personal spending figures for May.

Majors: In the US, Minneapolis Fed President Narayana Kocherlakota said the FOMC will leave policy accommodative after its bond-buying program is eventually scaled back, reiterating the sentiment of other Fed officials who spoke earlier in the week. Meanwhile, there was a surprise downward revision to the third estimate of US Q1 GDP to 1.8% q/q annualised from 2.4% q/q.

Personal consumption was the main driver of the revision, now estimated to have grown at a 2.6% q/q annualised (from
3.4% q/q in the second estimate).

The theme of consolidation in currency markets continued overnight, with the emerging market and commodity currencies recovering more ground. For the EUR the catalyst appeared to be comments from ECB president Draghi that any exit to monetary stimulus remained 'distant' (similar comments were made in yesterday's overnight session).
Economic Calendar
27 JUNE AU Job Vacancies
Uk GDP
US Initial Jobless claims
NZ Trade Balance

For latest pricing, ranges, visit www.bellfx.com.au