Australian Dollar Outlook –5/29/13

New 17-months lows of USD 0.9570, AUD breaks stop and drops below 0.9600 within minutes this morning.

Australia: The currency markets started the overnight session with the AUD taking out stop losses up towards the 0.9670/80 level. We saw USD 0.9696, before the US data saw a complete unwind. We have now just traded through the 0.9590 barrier level, and have seen a low of 0.9560. The massive move higher in the USD is still playing out. The next big support is 0.9380/0.9400. The AUD is largely unchanged but at 1.1870 against the NZD. The ABS will release Q1 Construction Work Done figures at 11:30AEST. The headline numbers reflect total private and public construction, including housing construction, non-residential building and engineering construction. These figures, along with the CAPEX data tomorrow, are used by the ABS as an input to determine business investment in the national accounts.

Majors: The USD was broadly stronger, particularly against selected emerging market currencies, following the better-than-expected US consumer confidence data. EUR/USD, while weaker, has held existing ranges, with another strong gain in European banking stocks suggestive of continued healing on the continent. ECB officials took the opportunity to try and dampen expectations of another rate cut at next week's ECB meeting, with France's Noyer perhaps the most significant. Today's Bank of Thailand rate meeting, Korean trade numbers, and China currency fixing will be key drivers. The USD is on the front foot, with Asia and the AUD underperforming. European equities rose early in the session, supported by some positive corporate announcements and comments from European Central Bank members which followed strength in Asian equities yesterday. Better-than-expected US consumer confidence data led to a sharp sell off in US Treasuries across the curve with the 10-year yield rising to its highest level in 13 months. US equities gapped higher at the open but traded lower through most of the session to finish modestly higher. Oil prices were higher overnight but spot iron ore fell 2.6% amid lower steel prices.

ECONOMIC CALENDAR

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