Australian Dollar Outlook 7/9/2010
Australia: The AUD has opened this morning relatively unchanged as the overnight session provided little direction with the US markets closed for Labour Day.
With very low volume in the markets, and no significant offshore data releases, the tight trading range that the AUD has experienced in the last 24 hours was evidence of this.
Investors will be waiting for today's interest rate announcement by the RBA, although it is unlikely to surprise.
The large majority of investors believe that the cash rate will remain steady at 4.5%; this is despite the recent strong domestic data.
The accompanying statement will be of particular interest as many will be looking to see whether the RBA will hint at a possible interest rate increase before the end of the year.
The other news that will interest the markets today is the expectation that the Independents will announce their decision on which party they will support, hopefully ending 17 days of speculation as to who will be elected into power.
Should it be announced that the Labour party will be in office for another term; this is likely to have a slightly negative impact on the AUD/USD, while a Coalition government may see a boost in the currency.
Majors: This morning President Obama has announced a $50billion plan for jobs, in a hope to pull the economy out of its current sluggish state.
With continued concerns that the US economy will experience a double dip recession, Obama is determined to prove that his current economic policies are working, and has several other initiatives that will be announced this week to invoke confidence in the markets.
The plan announced this morning has a time line of six years which will see the re-building of roads, railways and airport runways, with a focus on job creation.
Despite this announcement and the positive payrolls data out of the US last week, the risk appetite was short lived with the EUR and GBP falling overnight and the JPY strengthen as people moved towards the 'safe haven'.
This reversal in market sentiment is mainly due to the large amount of central banks that are meeting this week and are unlikely to result in any rate rises; with many speculating that further quantitative easing may be required in many major economies.