Australian Dollar Outlook – December 12, 2014

Four thousand U.S. dollars are counted out by a banker counting currency at a bank in Westminster, Colorado November 3, 2009. REUTERS/Rick Wilking

Bell FX Currency Outlook: The Australian Dollar is trading lower this morning, having given up gains made on the back of yesterday's good jobs data.

Australia: The AUD is currently trading around 0.8260, after making a high early yesterday of 0.8375, as Australian employment figures surprised on the upside. Australian employers added 42.7k jobs in November, the most in more than two years, and almost three times economists' forecasts (+15k), while the jobless rate was 6.3% as expected. This strong number was driven by an increase in part-time employment, which was up 40k. As the composition of these numbers was digested, the AUD was unable to hold on to any gains for long. Last night saw the selling continue, with the AUD touching a low of 0.8216, as Glenn Stevens gave a speech talking the AUD down. Additionally, there was broad USD strength following a good retail sales number (see below). The Reserve Bank Governor indicated the nation's currency will probably decline further next year and pushed back against calls for near-term interest rate cuts because the economy is performing as the central bank forecast. He suggested the economy would benefit at 0.7500, especially given the recent declines have been driven by USD strength and the AUD has changed little in trade-weighted effective terms. There is no Australian data out today but this afternoon sees the release of Chinese retail sales and industrial production.

Majors: As stated above, a strong US retail sales report for November help snap a three day slide in the USD, while also boosting equities. The headline figure showed sales increased 0.7% (vs. 0.3% expected), while 'control' sales, which feed into GDP calculations, rose 0.6% (vs. 0.5% expected). Initial jobless claims were also down 3k on last week. In Europe the ECB TLTRO tender disappointed and it looks like Draghi won't be able to boost the ECB's balance sheet by EUR 1 trillion with its TLTRO programme alone (opening the door for more radical action, such as QE). Norway's central bank has issued a surprise rate cut driving the NOK to its lowest level since 2009. The rate was lowered by 0.25 percentage point to 1.25%. Brazil's real fell to a nine-year low on concerns the Federal Reserve will begin raising interest rates sooner than expected as the U.S. economy recovers, making emerging-market assets less attractive. The main data releases tonight are employment change and industrial production in Europe, and PPI in the US.

ECONOMIC CALENDAR

12 DEC JN Indusrial Production Oct

CH Fixed Assets, Retail Sales, Industrial Production Nov

EC Industrial Production Oct

US PPI final Demand & Uni Michigan Confidence Dec

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