Australian Dollar Outlook – 6/7/13

Bell FX Currency Outlook: The Australian Dollar is higher this morning after some very large moves in key international currencies in the last 24 hours with volatility extreme.

Australia: The AUD has been no exception, hitting a fresh low of around 0.9435 about 2.30pm AEST yesterday but then literally gapping back up and rallying to a high of 0.9674 some 12 hours later. This morning it is trading around 0.9570. These moves in the AUD were part of some huge moves in offshore currencies, the most spectacular a rise in JPY to a high of 95.91. The JPY has gained about 2% on the USD over the past 24 hours. The explanation for these moves comes from at least three sources. Firstly, the risk of US non-farm payrolls being weak which would lead the US Federal Reserve to decide whether or not to start winding back its stimulus program sooner rather than later. Secondly, inaction from the ECB and the Bank of England, which, while disappointing, was expected. Thirdly, concerns about how successful Abeconomics will be, the PM's blunt 'third arrow' announced on Wednesday underwhelming. The AUD is likely to spend today's local session treading water ahead of the release of key US non-farm payrolls figures, giving an indication of how the US jobs market is faring. Expectations are the AUD will rally if the employment figures are disappointing but will remain steady if the figures were better than expected.

Majors: A weaker USD was the most obvious story overnight with the Greenback down against all the G-10 currencies. The CHF made the biggest gains, apart from JPY, of 1.3%. The EUR returned a 1% gain with President Mario Draghi not as dovish as the market had expected in his press conference, pointing to some indications of improved sentiment in Europe and saying that the changes economic indicators since the last meeting were not "sufficient to grant action now". All of this ahead for the USD ahead of one of the most anticipated US payrolls releases in recent memory, due tonight. Better than expected payrolls data will be interpreted as consistent with earlier tapering and, as such, the USD should be stronger. Today in Asia markets will consolidate the large moves overnight.

Economic Calendar

07 JUNE AU iG Perf of Construction Index May

UK Trade Balance Apr

US Change in Nonfarm Payrolls

US Unemployment Rate

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