Australian dollar outlook 28/1/2011
Australia: The Australian dollar has opened lowerthis morning as the risk appetite of investors faded duringthe overnight session.
After remaining fairly firmthroughout the Asian session yesterday, the AUD wasknocked lower on news that US credit risk appraiser,Standard & Poor's cut Japan's credit rating for the firsttime since 2002.
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It said that Japan lacked a "coherentstrategy" to ease the highest debt of any industrialisednation and cut Japan's long-term sovereign debt to "AAminus" from "AA". It is the first downgrade of a G7 membersince Italy in October 2006.
News of the downgrade hurtinvestor risk appetite and we saw the AUD sold off downthrough USD0.9900.
Also weighing on the AUD was theyesterday's announcement of the Gillard government'sflood levy. Prime Minister Gillard said her governmentwould impose a one-off flood levy of 0.5% for middleincome earners, while those who earn $100k per year andmore will be subjected to a 1% levy.
The announcementsaw traders slashing the likelihood of a near term interestrate hike by the RBA and the AUD was sold off as a result.On the day the AUD is expected to be supported on thedips, however investors will be waiting to see the marketsreaction to Japan's downgrade. There is no local databeing released.
Majors: The JPY tumbled overnight after Standard &Poor's downgrade of Japan's sovereign debt rating.
TheEUR was pulled off its intra highs following the news, whilethe USD rallied. Data out of the US was mixed but stillshowed the US was slowly chugging on the recovery road.Durable goods orders fell 2.5% in December, below market expectations of a 1.5% gain.
However orders excluding transport rose by 0.5%, while core orders rose 1.4%following a 3.1% gain in November.
Pending home sales printed above markets expectations, rising 2.0%. Whileinitial jobless claims spiked 51k to 454k, although it wassuggested that the recent severe weather had contributedto this.
Tonight the market will focus its attention to US GDPfor Q4, with the market expecting the US economy to havegrown at an annualised rate of 3.5%.