Australian Dollar Outlook - 07/11/2012

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By Christine Gaylican | November 7, 2012 10:43 AM EST

Bell FX Currency Outlook: Australian Dollar hits fresh highs amidst Melbourne Cup surprise hold from the RBA

Australia: The Australian Dollar saw a sharp move upward in yesterday's session as the Reserve Bank of Australia (RBA) surprised markets leaving
interest rates unchanged at 3.25% at their monthly meeting yesterday.

The local unit extended its gains overnight rising to a high of 1.0448 against a weaker Greenback; its highest point since September 20 to open at 1.0430 this morning. The RBA noted that "with price data slightly higher than expected and recent information on the world economy slightly more positive, the stance of monetary policy was appropriate for the time being".

With key domestic labour market and wage data due before year end, a rate cut for December could still be a possibility. With a general "risk on"
tone in markets and no domestic data due for release today, we expect the dollar to fluctuate around current levels as markets await the outcome of the US Presidential election this morning.

Majors: Relatively poor European data was overlooked as markets appear to be pricing in an Obama win. US equity markets rose solidly, along with bond yields and commodity prices - all consistent with an Obama win, with Ben Bernanke remaining as the Fed Chairman and loose monetary policy continuing.

The election result will be a positive for markets, although the looming fiscal cliff remains a concern. The S&P 500 rose 1.0% to 1,431 with the DJIA ending 1.2% higher at 13,536. Poor data out of the Eurozone and UK overnight suggesting the regions could be headed for a double dip recession was overlooked as the French Government announced EUR 20bn in business friendly tax policies boosting risk appetite.

The Euro Stoxx rose 0.7% to 2,536 with the German DAX ending 0.7% to 7,378. Oil prices ended higher amidst the risk on tone, Brent rose 3.1% to USD 110.9 per barrel and WTI rose 3.3% to USD 88.4 per barrel. Spot gold prices rose 1.8% to USD 1,715 per ounce with metals and commodities broadly stronger.
Economic Calendar
7 NOV NZ RBNZ Financial Stability Report
EU Sep Sales
EU Issues autumn economic forecast
EU Merkel speaking
GE Sep Industrials production
UK Oct BRC shop price index %yr
US Sep consumer credit $bn

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