Australian Dollar Outlook – January 13, 2015

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: Oil prices have again been the stand out story overnight. Who breaks the stalemate and cuts production first, OPEC or US shale producers?

Australia: The Australian Dollar is trading around 0.8160, down from yesterday's high 0.8255. The USD gained broadly, and the AUD was caught up in the action. To highlight how much impact the USD is having at the moment one only needs to look at the solid rally in the AUD following softer than expected housing finance data in the Asian session yesterday and the weak US wage growth figures Friday night. It also was boosted yesterday following an upbeat ANZ survey showing local job ads rose for the seventh month in a row in December. Today, the AUD could be boosted once again by a solid China trade report.

Majors: The EUR outperformed against a backdrop of USD buying after Banque de France Governor and ECB Governing Council member comments. Indications are that the ECB is ready to adopt quantitative easing if necessary, but no decision to do so has yet been reached. Most notably, Banque de France Governor Noyer said that Greece's election is no obstacle to QE being adopted this month and added that the majority of financing still needs to go via the private sector. That would play into reports that the maximum size of outright sovereign bond purchases would be EUR500bn, towards the lower end of expectations that prevailed recently. GBP continues to trade in high correlation to EUR, as European events dominated. Tonight's UK CPI read is expected to return to positive territory, although global trends suggest a sub-zero result would not be surprising. Oil price weakness persisted overnight, helped by bearish analyst predictions, with Brent crude falling to fresh 5½ year lows, US46.66/bbl.

Economic Calendar

13 JAN AU ANZ Roy Morgan Weekly Consumer Confidence Index

CH Trade Balance Dec

UK CPI Dec

US NFIB Small Business Optimism Dec

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