Bell FX Currency Outlook: The Australian dollar is unchanged this morning currently trading at USD1.0115 as the offshore markets digested the result of the Greek elections.
Figure 2. U.S. Dollar Index
Australia: Yesterday morning the AUD rallied on the news that the proeurozone New Democracy party had been elected into power. It is expected that they will attempt to form a government with PASOK; another pro-bailout party; giving them a combined 162 seats out of the available 300.
Many saw this as a positive move as it reduces the likelihood that Greece will leave the Euro-zone but rather work on improving the current austerity measures that are in place.
However the positive feeling was short-lived as concerns moved to Spain, with their bond yield rising to a new record, and pushing above the significant 7% level. Our local trading session today sees the release of the RBA minutes from the June board meeting where the RBA once again reduced the cash rate by 25bps.
Given the recent comments by the RBA Governor Glen Stevens, economists aren't expecting too much 'new' news in the release, but rather reaffirming the gradual approach to monetary policy easing. While this statement is noteworthy, we expect that the AUD will continue to tread water during our local session, rather looking towards offshore developments for direction.
Majors: The positivity felt in the markets following the Greek election didn't last long, as many investors come to the realisation that there is still a long way to go before a solution for the ailing region has been reached.
While this is a move in the right direction, until a working coalition government has been finalised and we have a better idea about how they are going to move forward, markets are moving cautiously.
The EUR/USD initially rallied up above USD1.2700, but this morning is back to its recent levels of USD1.2550. Equity markets across the board were mixed, as they try to digest both the news out of Greece and the continuing struggle in Spain. In Europe the Euro Stoxx 50 declined 0.7%, while Germany's DAX and the FTSE rose 0.3% and 0.2% respectively.
And over in the US, the DOW fell 0.2% while the Nasdaq rose 0.8%. Although majority of the attention was focussed on Europe overnight, the US did post some positive data. The NAHB homebuilder activity and sentiment index rose by 1pt to +29 which is its highest level in 5 years.
19 JUNE AU RBA Board Minutes
US Housing Starts
US Building Permits
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