Australian Dollar Outlook – 3/29/2012

Bell FX Currency Outlook: The Australian dollar gave up ground against most of the other major currencies overnight as speculation grows that that RBA may move to cut official interest rates next month.

Australia: An article written by Terry McCrann is suggesting there is a distinct chance the RBA may announce a cut in the cash rate after their Board meeting next week. Given the comments made in recent times by the RBA, essentially acknowledging the difficulties in sectors of the Australian economy affected by a high AUD, such as manufacturing and tourism, Mr McCrann's comments may be on the mark. The AUD has also come under some selling pressure due to lower commodity prices and fears that China may be slowing faster than forecast. Recent data releases out of China, particularly in relation to industrial activity, have been far from encouraging and now political uncertainty is also emerging due to the change in President later this year. Should the AUD's yield differential begin to erode over coming months a move back towards parity may not be too far away.

Majors: A relatively negative offshore trading session has seen equity markets sold off and increased demand for the traditional safe haven of the USD. In the US, the Commerce Department reported that Durable Goods orders increased less than expected at 2.2% in February, raising concerns about the strength of the US economic recovery. The news out of Europe wasn't any better. Spain is believed to have fallen into its second recession in 3 years, while in the UK, British GDP for the 4^소 quarter was down by a larger-than-expected 0.3% q/q. European finance ministers are due to meet on Friday in Copenhagen, with any subsequent announcements expected to be closely watched by the markets.

ECONOMIC CALENDAR

29 March AU Job Vacancies FEB

EU Euro-zone Consumer Confidence MAR

UK Mortgage Approvals FEB

US Kansas City Fed Manufacturing Activity MAR