Australian Dollar Outlook – December 10, 2014

US Dollars And Euros Banknotes — US dollars and euros banknotes are seen in this illustration photo taken at a change bureau in Paris, October 28, 2014. Reuters/Philippe Wojazer

Bell FX Currency Outlook: The Australian Dollar has rallied off new lows as the USD and global equity markets weakened overnight.

Australia: It was a volatile twenty-four period as global equities recorded sharp falls, the USD consolidated and the AUD made new four and a half year lows before bouncing 150 points. Yesterday's selloff began in the morning with the AUD falling from 0.8300 to 0.8230 range (against the USD) as the NAB became the second major bank to announce that they expect to see rate cuts by the RBA in 2015. This follows the lead of Westpac, who announced the same update to their forecasts last week. Yesterday's NAB business confidence and conditions data also helped push the AUD lowers as both numbers came in well below last month's levels. From these lows yesterday afternoon the currency rallied to 0.8370 by the early hours of the morning, driven by USD weakness (see below). However these gains could not be held on to and the AUD is back around 0.8300 this morning. There are several data releases out today, starting with Westpac consumer confidence at 10:30AEDT, ABS home loans and investment lending data at 11:30AEDT and finally China CPI and PPI at 12:30pm.

Majors: It was an interesting night, with a risk off tone in equity and bond markets but the USD also weaker. The JPY gained the most versus the dollar in 18 months as investors sought safety with China tightening lending rules and political turmoil increasing in Greece. Greek PM Samaras has brought forward a parliamentary vote on a new President, which could see parliamentary elections early next year and a change of government to the anti-bailout party Syriza. The USD weakened against most major peers on this news and also dropping energy prices boosted speculation the Federal Reserve will delay raising interest rates amid a lower outlook for inflation. New Zealand's central bank, the first in the developed world to raise interest rates this year, is finding inflation less menacing than it anticipated as milk and oil prices plunge. The RBNZ

Governor Graeme Wheeler is expected to signal a prolonged interest-rate pause when he delivers his latest monetary policy statement tomorrow. Tonight is relatively quiet on the data front with only UK trade balance and US mortgage applications data.

ECONOMIC CALENDAR

10 DEC NZ Crown Financial Statement

AU Home Loans MoM, Owner occupied #

CH CPI/PPI YoY

JN Consumer Confidence

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