Australian Dollar Outlook 6/21/2011
Australia: While the European Ministers were unable to come up with a solution to the Greek debt crisis, and have postponed any decision until next month; they did state last night that they were not going to allow Greece to default on their loans.
Despite a lack of resolution, this provided the markets with some comfort, and saw the AUD push higher towards USD1.0600 following the lead from the EUR/USD.
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Equity markets in the US also reacted well to the news, posting positive results once again; the DOW was up 0.6% and the Nasdaq and S&P500 both up 0.5%.
Today sees the release of the RBA's minutes from their June monetary policy meeting where interest rates were left on hold at 4.75%.
Investors will be interested to see the comments from the central bank, following last week's hawkish comments from the RBA Governor Glenn Stevens.
The comments were somewhat contradictory to the statement released after the interest rate decision in June; therefore the market will be looking for indications as when the next rate hike will be, with most investors predicting August.
This will of course be dependent on some important top tier data including the Q2 CPI which will be released late July.
Further hawkish comments in the release today could see the AUD push through its recent trading range.
Majors: As mentioned above, the progress on a solution to the Greek debt crisis provided most of the direction for the offshore market.
On top of the comments that the Euro-zone finance ministers will not allow Greece to default on its debt, they were also able to come to an agreement to increase the European Financial Stability Fund to EUR440bio, which provides a further lifeline to the euro-zones most distressed economies.
This saw the EUR/USD push up through USD1.4300, up from a low of USD1.4190.
While it's likely that developments relating to Greece will continue to influence markets, in the US most are waiting for the Federal Reserve announcement on monetary policy which is due out later this week.
While no movement in the interest rate is expected; investors will be watching for clues on the health of the US economy.
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