An Australian one dollar coin can be seen amongst various other Australian coins at a store in Sydney, Australia, February 11, 2016.
An Australian one dollar coin can be seen amongst various other Australian coins at a store in Sydney, Australia, February 11, 2016. Reuters/David Gray

Bell FX Currency Outlook: The Australian dollar is higher this morning which is mainly attributable to quarter-end FX flows from index funds and other market portfolios balancing exposures.

Australia: With markets still seeking some clarity on the terms of Brexit, or the outlook for the UK economy, sentiment focuses on equities. The AUD and NZD both rallied overnight as the UK’s FTSE 100 equity index regains its pre-Brexit highs. It seems unlikely Brexit will be averted, markets are simply moving on. The fallout for the UK economy appears that it will be very real but slow. There’s a lot of water yet to flow under the bridge. Today sees the Reserve Bank’s private credit data and the Australian Bureau of Statistics’ official job vacancy figures, both for May. Beyond that, Australia’s Federal Election is held on Saturday and opinion polls are fairly evenly balanced although betting markets suggest a Liberal-National Coalition win. What will be important is the extent of the vote for the minor parties in both the House of Representatives and the Senate.

Majors: In the majors, markets continued to trade overnight like another round of QE was announced, with real economic Brexit fears sidelined. Federal Reserve rate hikes have been pushed out to 2018. Global equities rallied overnight. Currencies generally added to yesterday’s moves. US Treasuries are little changed, while the UK curve flattened slightly. Commodities continued to recover from the Brexit induced sell-off. A weaker USD amidst a broader risk-on tone saw commodities push higher. Oil led the gains, supported by another large decline in US inventories. Crude oil production in the US fell. Industrial metals rose with expectations of more accommodative monetary policies improving investor sentiment. Despite the “risk-on” tone, gold continued to push higher. While the safe haven buying has abated as the shock over Brexit subsides, investors are now focused on the Fed. With expectations of a rate hike diminishing by the day, investor demand is remaining strong. The market will continue to look to GBP and international equities for a gauge of risk.

Economic Calendar 30 JUNE

  • JN Industrial Production May
  • AU Private Sector Credit May
  • UK GDP Q1
  • EC CPI Estimate/Core Jun

Bell FX

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