Australian Dollar Outlook – December 8, 2014

Australian one dollar coins surround a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Australian consumer prices rose by more than expected last quarter while underlying inflation proved alarmingly high, reviving pressure for an increase in interest rates and lifting the local dollar to a 29-year peak. Reuters/Tim Wimborne

Bell FX Currency Outlook: The Australian Dollar has opened this week around the .8300 level as Friday's US jobs report exceeded forecasts and the USD continued its strength.

Australia: The AUD hit a new 4½ year low as the November non-farm payroll data in the US showed 321k new jobs were created last month, well above forecasts of 230k. There were also positive revisions to the last two months of job figures with another 44k jobs being created. These better job numbers raised the prospect that interest rates may be raised in the US earlier than the general view that rates will start to rise in June, 2015. With much talk the last week that our local rates may fall to encourage more growth locally, the AUD was weaker against all the major currencies. The recommendations of the Australian Financial System

Inquiry chaired by David Murray were released yesterday and include raising capital ratio levels at the banks to "unquestionably strong" levels to withstand a future financial and economic crisis. The Australian government will respond by March 31, 2015. Today we will see the latest job ad figures from the ANZ and also the latest trade figures from China. Attention will be focused on the latest figures for iron ore imports. As we have seen the AUD could move either way depending upon the figures but the AUD's future path is at the mercy of the strength/weakness of the USD.

Majors: The better job figures from the US saw the unemployment rate remain the same at 5.8%. Average hourly earnings kicked up 0.4% MoM although on a YoY basis they remain at 2.1%. The market will be paying close attention to the comments from the next Federal Reserve meeting in mid-December for hints on the timing of interest rate increases. US factory orders fell 0.7% in October from a flat result expected while

German factory orders rose a strong 2.5% from a 0.5% increase that was expected. The German Bundesbank has lowered their estimate of GDP growth in Germany for 2015 from 2% to 1%. There was much talk about what actions the ECB might take to encourage growth and fight deflation in Europe after their latest meeting last Thursday night. S&P raised Ireland's sovereign debt rating to A- from A while cutting Italy's rating one notch from BBB to BBB-.

ECONOMIC CALENDAR

08 DEC US Labour Market Conditions change

AU David Murray speaks at CEDA Financial System Inquiry

CH Trade Balance

JN GDP SA QoQ

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