Bell FX Currency Outlook: The Australian Dollar is steady this morning after falling to its lowest level in more than two weeks on renewed concerns about the euro zone sovereign debt crisis.
An increasing number of people are trying more ways to sneak money out of countries that are buckling under the weight of financial crises.
Australia: Troubles in Greece and Spain again brought the euro zone crisis into focus and ensured the AUD tested downside support levels by
trading as low as 1.0328 which is its lowest level this year since 11 September this year.
Spain's 2013 budget, due to be released on Thursday night (Australian time), will cut public spending in a bid to reduce the country's debt burden and ward off the need for a full-scale bail-out.
The ECB announced on September 6 it would try to push down borrowing costs of struggling member states, such as Spain, through bond purchases, but only if the country agreed to certain conditions, which are expected to include specific austerity measures. The country's hesitancy to request a bail-out saw its bond yields rise back above 6% overnight.
Meanwhile, in Athens, police clashed with angry demonstrators during a nationwide strike in protest against a new round of austerity measures introduced in exchange for vital bail-out loans.
Broadly, we feel the AUD remains under pressure for the time being and a Australian Exporter Parity Party may be a chance in 2012, especially if the Spanish budget suggests Spain will continue to resist seeking a bail-out. In Australia, the Share Price Index slid 18 points last night and the Australian 10 year Bonds rallied to yield 2.985%.
The market seems divided about the RBA's interest rate decision next week with more analysts suggesting the Bank may wait for crucial data in November. We feel the bank needs to cut now and are of the opinion 50 bps is appropriate.
Majors: The US Dollar strengthened slightly against most major currencies and while currency moves have remained quite modest, there is a sense now we might see some decent range-breaks if Spain doesn't accept a formal bailout package soon.
Industrial profits data in China are released today which have become more market relevant. Oil prices were mixed last night, spot gold fell 0.5%, weakened by a stronger USD and profit taking ahead of the quarter end. Base metals prices were generally weaker as were agricultural commodities prices.
In the US, housing data was slightly disappointing with new home sales falling 0.3% in August which was much softer than the expectation for a 2.2% increase. That said, the level of sales at 373K is still near a 2-year high and has been trending higher for the past year.
27 SEPT AU Job Vacancies
EU Euro-zone Consumer Confidence
US Initial Jobless Claims
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