Australian Dollar Outlook - 29 April 2013
Bell FX, Rivkin Securities, IG Markets Currency Outlook: There was a slight weakening of risk-related assets over the weekend with the lower-than-expected turnout of U.S. GDP. The AUD opened this morning below the 1.0300 level banking on hopes that the ECB rate decision and the China PMI will provide the direction during this week's trading.
Australia: Analysts from Bell FX, Rivkin Securities and IG Markets pointed out how the U.S. economic growth figures 2.5% had an impact on currency markets over the weekend.
Rivkin Securities analyst Tim Radford explains that the weakening U.S. dollar helped trim the decline on the Aussie dollar.
"The ECB rate decision will be a key factor behind currency market moves this week, with a 25 basis point cut from 0.75 to 0.50 by the ECB likely to help boost demand for the Australian dollar. Earlier this morning, the Australian dollar was trading at $1.0273, down from Friday's close of $1.028," Mr. Radford says.
With not a lot data due this week and also a number of holidays happening this week in the Asian markets, we expect the AUD to
drift at or around these levels with a good chance that it may test the 1.0200 in the near term, adds Bell FX analyst Rebecca Kelly says in an emailed investors note.
Ms Kelly says that tomorrow in Australia, the release of private sector credit figures followed by residential building approval figures the next day.
"In China, financial markets are closed from today through Wednesday for the May Day holidays while Japan will be closed only today. On Thursday, we will see Chinese PMI data for manufacturing and the service sectors which are always closely watched and have implications for the direction of the AUD," she explains.
Later today, official data as to the current budget shortfall in Australia for this financial year may expand to a figure of AUD12bn as government revenue lags will be released.
Majors: Over in Europe, there was plenty of talk around Italian politics and whether or not a government was close to being formed, IG Markets strategist Stan Shamu says in a morning briefing report.
"FX markets have started off what looks like a busy week on the macro front, mixed with gains for EUR/USD, while USD/JPY and AUD/USD are fairly mixed. This week we have the FOMC and ECB meetings to look out for, with recent data making the two carry a bit more weight than usual. There are a growing number of analysts calling for a 25 basis point rate cut by the ECB, particularly with European economic readings in core countries just failing to gain any traction," explains Mr. Shamu.
Over in the US, with jobs growth losing momentum in recent times, Mr. Shamu notes that analysts are expecting the Fed to approach policy more cautiously and perhaps we'll hear less rhetoric of an abrupt end to QE.
"As a result, it could be a big week for the greenback and the single currency with plenty of positioning in the EUR/USD cross. The pair has gotten off to a strong start this morning, charging to a high of $1.307. This is in response to news that Italy formed a coalition government over the weekend," Mr. Shamu of IG Markets forecasts.
The US FOMC meeting over two days starts on Tuesday while most eyes will be on the ECB meeting on Thursday.
"It has been widely predicted that the ECB will cut their cash rate form 75bps to 50bps but some cold water was thrown on this prediction lately when ECB official Joerg Asmussen warned against the side effects of low interest rates," says Bell FX's Ms Kelly.
The Bank of Japan's meeting on Friday produced no further surprises and no additional monetary stimulus as they aim to raise their inflation rate to 2% over the next two years.
Economic Calendar
29 APR AU Prime Minister Julia Gillard Speaks
JN Public Holiday
EU Consumer Confidence Apr