Australian Dollar Outlook – January 12, 2015

A man walks past various currency signs, including the dollar (top R), Australian dollar (top L), pound sterling (centre L) and euro (bottom L), outside a brokerage in Tokyo October 28 2014. A year-long investigation into allegations of collusion and manipulation by global currency traders is set to come to a head on Wednesday, with Britain's financial regulator and six big banks expected to agree a settlement involving around ?1.5 billion ($2.38 billion) in fines. The settlement comes amid a revival of long-dormant volatility on the foreign exchanges, where a steady rise of U.S. dollar this year has depressed oil prices and the currencies of many commodity exporters such as Russia's rouble, Brazil's real and Nigeria's naira - setting the scene for more turbulence on world financial markets in 2015. Picture taken October 28, 2014. REUTERS/Yuya Shino

Bell FX Currency Outlook: The Australian Dollar has opened around the .8200 level as US non-farm payroll numbers were better than expected but wage growth disappointed.

Australia: The payroll figure for last month rose by 252k versus expectations of a growth in jobs of 240k as the unemployment rate fell 0.2% from 5.8% to 5.6%. This would have typically sent the USD higher and the AUD lower as the expectation increases that the US will raise interest rates sooner than later due to the better job numbers. The markets focused on the lack of growth in average hourly earnings which fell 0.2% mom in December and a revision downward for the November figures which originally revealed a rise of 0.4%. This figure was revised downward to growth in November of only 0.2%. Overall the USD was slightly weaker which allowed the AUD to trade up to the .8200 level. Today we will see the latest local housing loans and investment loan figures for November as well as the latest ANZ job ad figures. We expect trading to be muted today as China is on holiday.

Majors: Although the US job numbers look good there was another fall in the labor participation rate in the US and the index now stands at the lowest level since 1978. There was a report that the staff of the ECB are recommending a smaller quantitative easing program of EUR500bn than anticipated. With approximately EUR250bn of LTRO's due in February the net effect of EUR250bn in new QE stimulation is less than most analysts have expected. On Friday industrial production figures from Germany and France were less than expected. German industrial production fell 0.1% mom versus the last figures of growth of 0.6% while the yoy figures fell 0.5% versus last month's figures of growth of 1.2%. In the UK, industrial production in November fell 0.1% mom and rose 1.1% yoy. Construction output rose 3.6% yoy although this was a lot lower than expected. Last week the Bank of England left interest rates unchanged.

Economic Calendar

12 JAN AU Home Loans Nov

AU ANZ Job Ads Nov

US Fed's Lockhart Speaks on US Economic Outlook

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