Australian Dollar Outlook - 09 January 2012

Bell FX Currency Outlook:
The Australian Dollar has opened up this morning slightly below 1.0200, after a better than expected jobs report in the US provided further proof the US economy is improving, although, the negative sentiment from the sovereign debt woes of Europe continue to overhang the financial markets.

Australia: US December non-farm employment numbers continued to improve with a rise of 200k jobs as compared to the 155k forecasted which saw the unemployment rate fall to 8.5%, the best level since February, 2009. We would normally expect the AUD to strengthen further on news like this but AUD has drifted lower as the negative sentiment form Europe weighed on markets as bond yields continued to rise and underlying economic data was negative.

Equity markets in Europe and  the US were generally weaker with most indices registering small declines.
The US Q4 reporting season starts early this week with Alcoa being the first major company to report later today. Later today in Australia we will see the result of retail sales for November where the market expects a rise of 0.3% mom as well as the release of the AiG construction index, new home sales and ANZ jobs data.

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Majors: The US jobs numbers confirmed that conditions in the US are slowly improving with all major job categories registering increases, average hours worked rose from 34.3 to 34.4 per week and average hourly earnings rose 0.2%. These better numbers from the US did not offset the continuing poor news out of Europe which saw the ECB step
into the market to buy Spanish and Italian debt.

Yields continued to rise with Italian 10 year maturities exceeding the crucial 7% pa barrier again 7.13%) and Fitch downgraded Hungarian debt to junk status as more articles comment on the growing FX crisis in Hungary where some major European banks are exposed to significant loan losses from local clients who have taken unhedged EUR loans.

Adding to this factory orders in Germany in November fell 4.3% and consumer confidence fell to a level much greater than anticipated which may indicate that the EU is heading toward recession if they are not already there. FX volumes this time of the year continue to be lower than average and with Japan celebrating the Coming of Age holiday today this is likely to be the case again today.
Economic Calendar
09 JAN AU AiG Performance of Construction Index Dec
AU HIA New Home Sales NOV
AU ANZ Job Advertisements DEC
US Consumer Credit NOV

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