Australian Dollar Outlook - Dec 3, 2015
Bell FX Currency Outlook: The Australian Dollar is steady near USD 0.7300 following yesterday’s rally.
Australia: Despite the US Dollar being quite bid overnight, the AUD has held onto yesterday’s gains. Federal Reserve Chair Yellen continued to switch the message from the start of hikes to the very slow pace of hikes. Commodity markets such as iron ore, gold and wheat fell to new lows overnight. Crude oil prices fell heavily with prices now threatening to break August lows. For iron ore, the imminent release of Port Hedland exports for November will be important to see if higher export volumes have contributed to the recent price weakness. Locally, the stronger Australian GDP and measured comments from RBA Governor Stevens did spur some outperformance on the crosses. Australia’s trade balance for October is released at 11:30am AEDT.
Majors: The EUR suffered as core inflation softened, while GBP fell on weak construction. The ECB is set to ease policy, but expectations are high and EUR bears may be disappointed. The central banking world finds itself in a very interesting position. ECB boss Draghi has markets expecting another aggressive policy easing tomorrow. Italian bond yields are now negative at the six-month term, and German yields are below zero out to nearly the 10-year window. In contrast, the Fed remains on track to raise the fed funds rate on 17 December for the first time in many years (with a 25bp hike 74% priced in). This intent was confirmed by Chair Yellen’s comments this morning, along with the intent to tread slowly and carefully thereafter. Equities have so far taken the prospect in a positive fashion. However, two weeks is a long time in financial markets. The US ISM non-manufacturing survey should show the US services sector remains solid, supporting the USD. Non-farm payrolls report is released tomorrow night and will be heavily anticipated.
Economic Calendar 03 DEC
- AU HIA New Home Sales Oct
- AU Trade Balance/Imports/Exports Oct
- CH Caixin Services PMI Nov
- EU ECB Interest Rate Decision
BellFx
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