Australian Dollar Outlook – 4-11-13

Bell FX Currency Outlook: The Australian Dollar has found renewed strength again hitting highs well above USD 1.0500 with the AUD trade-weighted index hitting its highest level in 28 years yesterday.

Australia: The release of FOMC minutes was a real focus overnight with the market scrutinising the paragraph on the eventual tapering of the Fed's quantitative easing program. There is a definite divide within the Committee about the timing and conditions for tapering. The US Dollar was stronger against the JPY and EUR but weaker against the commodity currencies, including the AUD. The Australian employment data is due this morning and after the huge increase of 71k in February, we expect this to play a role. Many are calling a fall in March employment, which would bring annual employment growth back to approximately 1% and the unemployment rate higher to 5.5% from 5.4%. Current money market pricing is predicting a 20% chance for a May RBA 0.25% cut. If the data fails to show up the February data as a clear aberration, rate cut odds are likely to be pared back and the AUD may find even more additional support meaning a look up to USD 1.0600.

Majors: As stated above, it was a lively overnight market encouraged by the early release of the March FOMC minutes following a premature release to Congress. Though there was arguably something for everyone in the minutes, and a significant risk that the message(s) have already been diluted by the poor March employment report, US Treasuries sold off on the comments that 'many' FOMC members saw merit in tapering the pace of asset purchases at some point over the 'next several meeting', albeit highly contingent on continued labour market improvements, and with a view to ending them altogether by year-end. The ascent in USD/JPY and JPY crosses was checked by comments from BoJ chief Kuroda that the BoJ took "all necessary steps" last week to achieve the 2% inflation target. There will be very keen interest in the weekly US jobless claims data as the market seeks to gauge the likelihood that the soft March employment print was a one-off and in light of the FOMC discussions about tapering QE bond purchases dependent on upcoming labour market performance.

Economic Calendar

11 APR AU Employment Change

GE Consumer Price Index

US Import Price Index

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