Australian Dollar Outlook - 31 May 2013
Bell FX Currency Outlook: The Australian Dollar remains steady above USD 0.9600 once again after a relatively quiet session overnight.
Australia: The US Dollar fell to its lowest level in 3 weeks against the major crosses on weaker-than-expected US economic data and reported month-end positioning.
A pick up in euro area economic confidence also benefited the EUR. US and European equities rose in choppy trade to finish the session moderately higher.
Iron ore prices fell another 1% overnight. The AUD is trading near 0.9660 this morning, around where it was yesterday afternoon, but it again touched key support around 0.9590 overnight before rapidly rebounding as the USD lost ground.
A similar low was seen yesterday after the Q1 Capex data showed a fall of 4.7%, although that was quickly reversed as expectations for 2013/14 pointed to a rise in spending. Most expect business investment to fall around 2% in 2013/14, keeping the pressure on the RBA to cut again later this year.
There is no question that the Australian economy faces some substantial challenges. The peak period of discomfort is still nearly a year away.
Mining investment is expected to only gradually decline until mid-2014, after which things should fall away more quickly. In Australia today, private sector credit is expected to have remained soft in April.
Despite the positive impact from recent RBA interest rate cuts, we expect credit growth would continue to have been weighed down by weak business investment.
China's official PMI is expected to drop further to 49.9 in May, below the benchmark level of 50 for the first time since September 2012, versus 50.6
in April.
Majors: In currency markets, the recent pattern of core currencies outperforming the periphery has continued. EUR and GBP rallied nicely,
while emerging market currencies remained under significant pressure.
Today's focus will be on the Japanese and Thai data avalanches, ahead of tomorrow's China PMI. Base metals prices were mixed overnight.
Copper rose 0.5% as production from top producer Chile fell 1.2% in April.
Also propping up metals was a weaker USD. Aluminium, lead and zinc all settled higher, while nickel was marginally lower. Both Iron ore and
thermal coal declined to USD111.6 per tonne and USD87.7 per tonne respectively.
Tonight, the US April personal income and spending outcomes for April are forecast to be slightly softer than March, while little change is expected in the Chicago PMI or the final reading for the University of Michigan consumer confidence. In Europe, the annual CPI estimate is expected to rise to in May, while unemployment is forecast to rise to 12.2% in April.
Economic Calendar
31 MAY AU Private Sector Credit MoM Apr
JN Jobless rate Apr
EC Euro-Zone CPI Estimate May
US Personal Income/Spending Apr
US PCE Deflator MoM Apr