Australian Dollar Outlook - 27 May 2013
Bell FX Currency Outlook: The Australian Dollar has opened slightly weaker this morning after a reasonably uneventful offshore session on Friday night.
Australia: In currency markets, cross rate moves continued to dominate the price action into the close of the week. The EUR and GBP stabilised, while JPY strengthened.
The AUD remained soft and seems to be looking for momentum ahead of Construction and Capital Expenditure reports this
week as the markets are still pricing a reasonable chance of a cut in interest rates in June.
At some point it seems fair to say markets will reassess the likely path of tapering of the US Federal Reserve's monetary stimulus from what seems to be the September consensus.
In this environment, the USD may give back some of its recent gains (that process perhaps has already started against the JPY) but it is difficult to see commodity currencies like the AUD benefiting much.
For AUD, in particular, weakness against most crosses should be assumed. Note the AUD/NZD cross broke key the 1.2000 support level on Friday.
In the day ahead, trade will likely be quiet with London and NY closed for holidays, although in Asia time the China industrial profits data will be scrutinised.
Interesting remark on the weekend from China's President Xi Jinping when he said the country won't sacrifice the environment to ensure temporary economic growth.
This is been interpreted as a further sign that the new administration is tackling some of the structural issues left by the
previous leadership, including moving towards a genuinely flexible currency.
Locally it's very quiet for the first part of this week.
Majors: The US kicks off with Memorial Day holiday today and note it is also a public holiday in the UK too (Late May Bank holiday).
Key data this week include Consumer Confidence, Case-Shiller house prices, revision to Q1 GDP, and then April personal spending and the ISM out Friday.
The USD and US Treasury yields were little changed on Friday. Data was better than expected on Friday night in Europe and in the US from the German Ifo and US durable goods. Japan was volatile on Friday managing a 7% intra-day range for the Nikkei.
Speaking over the weekend, BoJ Kuroda gave Japanese asset market/ economy bulls more encouragement, saying that there was "no sign investors have excessively bullish expectations in asset markets or in activities of financial institutions". It's very quiet today with BoJ 26 April minutes due.
Economic Calendar
27 MAY JN Bank of Japan Meeting Minutes
US Public Holiday: Memorial Day
UK Public Holiday: Spring Break
Australian Dollar / US Dollar