Australian Dollar Outlook – 3-7-13

Bell FX Currency Outlook US dollar strengthens as strong US data adds to positive sentiment.

Australia: Another round of strong US data has helped underpin strength in the US dollar with the Greenback higher against all major currencies overnight. The Australian dollar has opened half a US cent lower after peaking at a high of 1.0300in yesterday's tradeas domestic GDP growth was released in line with market expectations

Domestic demand was soft in the quarter but exports grew strongly with figures printing up +0.6% q/q and 3.1% y/y

.Upside momentum was knocked out of the AUD as traders took profits overnight with the release of a positive employment figure in the states. The improved employment figure coupled with positive data from the US in recent weeks saw hopes of a possible end to QE in the states add to US dollar strength overnight. This was a reverse movement to that seen lately where good economic data would usually boost riskier currencies like the Australian Dollar.

Prolonged improvements in employment for the US does begin to raise the possibility of the US Fed scaling back some of their QE; this has been viewed as US dollar positive. QE in the US is a contributing factor as to why the AUD is above parity against the USD.

In Australia today international Trade data from January will be released at 11:30am, where a deficitof 0.51B is forecast The BOJ also conducts its last policy meeting under Shirakawa today ahead of next month's regime change.

Majors: US data had a hand in driving up stock prices overnight with US equities extending their gains as the ADP employment report showed 198k jobs were added in February with upward revisions to the January figure.

The DJIA ended 0.3% higher at 14,303 and the S&P 500 ended 0.2% higher at 1,543. The US Fed Beige book was also released overnight adding to the general positive tone, de describing growth as modest for most regions and consumer spending seen as increasing through the majority of districts.

European equities were mixed ahead of the highly anticipated ECB and bank of England policy meetings and ECB press conference tonight. The German DAX closed 0.6% higher at 7,919 while the FTSE fell 0.1% to 6,428. Oil prices were lower overnight with WTI futures declining 0.6% to USD 90.5 per barrel and Brent falling 0.7% to USD 111.1 per barrel. Commodities and metals were mixed with spot gold ending marginally higher. A plethora of data is due for the Eurozone and US although there is keen interest in the BOE and ECB meetings.

ECONOMIC CALENDAR

07 MAR AU Jan Trade Balance AUDbn

JP BOJ Target Rate

EU ECB Announces Interest Rates

UK BOE Policy Defense

US Jan Trade Balance $bn

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