Australian Dollar Outlook – December 16, 2014

Paramedics remove an injured woman on a stretcher from the Lindt cafe, where hostages were being held, at Martin Place in central Sydney December 16, 2014. Australian security forces on Tuesday stormed the Sydney cafe where several hostages were being held at gunpoint, in what looked like the dramatic denouement to a standoff that had dragged on for more than 16 hours. REUTERS/David Gray (AUSTRALIA - Tags: CIVIL UNREST CRIME LAW)

Bell FX Currency Outlook: The Sydney siege ends in tragic circumstances in the early hours of this morning with a sad loss of life for some innocent people. Market moves in Australia remain dominated by global events.

Australia: Yesterday's MYEFO update came and went with little to no market impact, most of the headlines well anticipated by markets from leaks. The AUD/USD has been trading toward the lower end of recent ranges in the lower 0.82s overnight against the USD that has not made further gains in a volatile session. The minutes from the RBA's December board meeting are released at 11.30 AEDT and Assistant Governor, Guy Debelle, speaks on Global Liquidity Risk at 12.15 AEDT. RBA Governor Stevens' comments last week suggested the Bank would prefer the currency to trade closer to USD0.75 than USD0.85 - and do more of the 'heavy lifting' in easing financial conditions than lowering the cash rate further. A planned release of the NSW half-yearly budget review has been postponed until Thursday.

Majors: In the currency world, selling of mainly oil-linked currencies looks to have spread to emerging markets, with some EM currencies falling to record lows against the USD. The Turkish lira is 2.9% weaker, aided by a rising political risk premium. The Russia rouble, which is massive 10.8% weaker for the day, taking its year-to-date loss to 48.8%. It traded in an incredible six big figure range overnight. The USD/IDR jumped, hitting a

16 year high of 12714, symptomatic of non-Japan Asia currencies at multi year lows. US industrial production data were much better than expected for November, rising 1.3% m/m. Capacity utilisation also rose to a new cyclical high recording the biggest monthly increase in 4½ years. Along with the very strong labour market data, the numbers point to an acceleration in activity in Q4. In contrast, the December Empire State (NY

Fed) manufacturing index fell to -3.6. Oil has been one centre of attention of markets overnight, crude prices starting the week on a positive note, WTI rising nearly 3% at the open, before capitulating, now down 3% for the session.

Economic Calendar

16 DEC AU ANZ Roy Morgan Weekly Consumer Confidence Index

AU RBA Interest Rate Decision Dec

GE UK CPI Nov

US Housing Starts/Building Permits Nov

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