Australian Dollar Outlook –3/4/2013

Bell FX Currency Outlook: The Australian dollar has started the day's trade above 1.0400 after a brief dip on Friday night into the high 1.0300's.

Australia: With stronger equity markets across the board on Friday in China, Europe and the US much of which was related to generally better economic data in many parts of the world the AUD had a brief flurry below 1.0400 but recovered as equity markets turned upward after a better US manufacturing report and revisions upward of previous employment data from the US. The weakness in the AUD was attributable to a decline in China's PMI manufacturing data for January where the headline number was 50.4 which was slightly lower than last month and below predictions.

January's non-farm payroll data in the USD rose just a bit lower than was expected at 157k but there were cumulative revisions to the two previous months of another 127k jobs. The unemployment rate rose by 0.1% to 7.9%. With the Dow index crossing the psychological barrier of 14,000 for the first time in five years and now getting very close to its historical high, optimism was reflected in all major equity markets. In Australia today we will see the release of ANZ job ads data and building approvals followed tomorrow by the RBA's decision on the cash rate. Most analysts now believe there will be no change to the 3% cash rate but the RBA's announcement will be carefully dissected for any hints of further monetary changes in the near future. On Thursday we will see local labour force data followed by Friday's release of the RBA's quarterly Statement on Monetary Policy.

Majors: Along with the continued generally positive earnings announcements from US companies, the ISM manufacturing survey for January registered a reading of 53.1 which was higher than December's figure of 50.2 and above expectations of 50.7. The University of Michigan Consumer Confidence index for last month also rose to 73.8 from the initial estimate of 71.3. European data continues to improve which pushed the EUR to a 14 month high versus the USD as manufacturing PMI data for last month was revised upward to 47.9 from 47.5 and the unemployment rate for the euro zone held at 11.7% versus expectations of a rise to 11.9%. Although these figures are not fantastic they do show some improvement in the general European economy although persistent high unemployment levels in Spain and Greece are an ongoing worry.

The GBP had a sharp fall against the USD as concerns surfaced again about the strength of the UK economy and some concern Gilts might lose their AAA credit rating.

Economic Calendar

01 MAR AU Building Approvals

AU ANZ Job advertisements

EU Spanish Unemployment Change

EU PPI m/m

GB Construction PMI

US FOMC Member Yellen Speaks