Australian Dollar Outlook - 23 December 2011

Bell FX Currency Outlook:

Positive US data supported sentiment overnight with the Australian dollar opening this morning at USD1.0130 against the Greenback, up from USD1.0080 late yesterday.

Australia: Equities and commodities saw a modest rally with the S&P 500 adding 0.83% at 1254 and the Dow Jones adding 0.51% at 12,169.65.

European equities also rallied, supported by the positive US data and healthy GDP figures released for the UK. The FTSE advanced 1.2% to 5457 with the DAX climbing 1.0% to close at 5852. Base metals were mixed with Copper (+1.1%) closed at USD 7,540 per tonne, Nickel (-1.5%), aluminium (+1.3%) and lead (+1.7%). Oil closed flat at USD 107.70 per barrel with gold giving up further ground in light trade closing down 0.6% at USD 1,604.90.

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We expect that the AUD will trade is a very tight trading range, given the thin markets in the lead up to the Christmas break.

Majors: In a sign that the US labour market is strengthening heading into 2012, the number of applications filed for unemployment benefits decreased to 364,000, the lowest level since April 2008. However, ongoing political bickering by US congress casts doubts on whether it will be able to come to an agreement over the payroll tax cuts and unemployment benefits due to expire at year end.

Overnight the European System Risk Board warned risks for Europe's financial system have intensified. German and Spanish bond yields edged higher, but eased in France with markets taking the comments in their stride as news that confidence is deteriorating in European banks, problems with bond markets continue and worsening growth forecasts, coupled with governments implementing austerity measures continues to weigh on markets is not really new news. UK, Q3 GDP was revised up slightly above market expectations with a sharp turnaround in business investment well up from the Q2 -1.4% q/q to +0.3%q/q.

This will be the last Daily Report for 2011, so from all of us here at Bell FX we wish you and your families a very Merry Christmas and a Happy New Year. We look forward to continuing to work with you in 2012.

Economic Calendar
23 DEC CH MNI December Flash Business Sentiment Survey
US Durable Goods Orders NOV
US Personal Income / Spending NOV
US New Home Sales NOV

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