Australian Dollar Outlook - 02/08/2012
By Christine Gaylican | February 8, 2012 10:21 AM EST
Bell FX Currency Outlook:
Australia: Yesterday was one of the more interesting days we have had in financial markets for some time and goes to show "it ain't over til it's over".
The Reserve Bank of Australia (RBA) did the opposite of what pretty much all of us thought was a certainty when they kept the cash rate on hold at 4.25%.
In holding off, the Bank substantiated its decision describing improved conditions in Europe, the US and China. The AUD rallied by nearly 1 US cent to USD 1.0823, its highest level since August. In assessing the AUD, it is important to consider the "tone" of the Bank's statement which suggests the RBA Board is content with current monetary policy settings and furthermore, note the Bank's willingness to cut with the RBA ready to act if "demand conditions weaken materially."
It appears there won't be a cut then unless the Banks sees a significant weakening in domestic economic conditions (unemployment pick up) or a re-tightening of financial conditions via a higher exchange rate or an increase in the
retail cost of credit.
So it appears the AUD is destined to stay at these levels for a while yet. The next piece of data is the NAB quarterly Business
Japanese data in Asia will probably [lay second fiddle to ongoing analysis of yesterday's RBA decision and statement.
Majors: The US Dollar was softer overnight following comments from FOMC chairman Bernanke that inflation would remain 'very subdued'. In his testimony to the Senate Budget Committee overnight, Bernanke noted the US economy still has "a long way to go before the labour market can be said to be operating normally", adding that "particularly troubling is the unusually high level of long-term unemployment".
He added the current unemployment rate of 8.3% "understates the weakness" of current labour market conditions and that the pace of improvement remains heavy and it will most likely take a couple of years to get down to a 7% unemployment rate.
Meanwhile, the EUR rallied following headlines stating Greek officials were working on a draft agreement in relation to the Troika's bailout conditions and this saw EUR/USD rallying above 1.3250 for the first time since early December.
The Scandinavian currencies all outperformed against the USD alongside higher oil prices.
08 FEB AU Westpac Consumer Credit
JP Trade Balance
GE Current Account
US MBA Mortgage Applications
To contact the editor, e-mail:
Most Popular Slideshows
- Taylor Swift Named Forbes' Second Highest Paid Country Musician [PHOTOS]
- Forever Lost: Indescribable Anguish for Malaysia Airlines MH17 Families, Remains of Some Victims May Never Be Found (PHOTOS)
- Global Aviation Accidents: UN to Form Safety Task Force, Gov'ts Should Share Intelligence Info to Avert Future Incidents on Flying Over Warzones (PHOTOS)
- Lunch with the Gods: Pope Francis Eats with Vatican Workers in Cafeteria
Join the Conversation
- ACT Party's Demand to Re Consider Maoris Privileges Evokes Reprimand
- Opinion Poll in New Zealand Shows National Party Far Ahead in Popular Support
- “Women should not laugh in public” - Turkish Deputy PM says
- Iran Leader Asks Muslims to Supply Arms to Palestine, Calls Israel ‘Rapacious Wolf’
- Canada Claims Good Progress in EU Trade Pact Despite Germany’s Defiant Postures
- Transfer News: FC Barcelona, Man Utd to Compete for Juan Cuadrado's Signature as Fiorentina Reveal Willingness to Sell
- Hilary Duff's New Music Video Chasing the Sun Goes Viral on YouTube [WATCH VIDEO]
- LeBron James to Return to Miami, Face Heat on Christmas Day 2014
- Shanghai Stock Exchange Will Not Extend Trading Hours
- Qatar's Surging Real Estate Prices Won't Affect Thriving Economy – Report