Australian Dollar Outlook – 12-20-12

Australia: The Australian Dollar has dipped back below 1.0500 against the Greenback as a lack of development in US budget negotiations drives markets. The US Dollar firmed as risk sentiment turned negative on what appears to be a stalemate between US President Obama and the House of Representatives. Thin trading conditions and comments from RBA Governor Stevens saying he could not guarantee monetary policy could produce a smooth handover from mining investment to other parts of the economy, weighed on the local unit despite a continued rally in iron ore prices. Domestically today the RBA will release its December bulletin along with a release of Foreign Exchange Transactions for November at 11:30am. This will be a key focus with rumours of late the RBA have been selling the AUD in an attempt to control its continued strength. The AUD could see a rise back toward 1.0500 against the US Dollar but will be unlikely to find much strength past that given the risk-off scenario at the moment.

Majors: US equities declined as President Obama announced he would veto Republican Speaker Boehner's "Plan B" (to only raise taxes on those earning in excess of US$1m) should it be passed through congress. Both parties are under pressure to introduce measures to avoid the impending "fiscal cliff" scenario at the start of 2013. The S&P 500 and the DJIA ended the session 0.4% lower at 1,441 and 13,296. US housing data printed slightly weaker after two consecutive months of strong rises falling to 861k vs. 872k market expectation. European equities rose overnight as headlines took a back seat to the US fiscal cliff negotiations and German business sentiment rose in December. The German DAX rose 0.2% to 7,669 while the FTSE rose 0.4% to 5,962. Oil prices strengthened buoyed by a drop in US crude inventories. Brent rose 1.3% to USD 110.4 per barrel while WTI Futures rose 1.9% to USD 89.5 per barrel. Gold fell moderately as selling pressure eased after a resolution to US negotiations was in doubt ending only 0.2% lower at USD 1,669 per ounce. Metal prices were mixed with commodity prices generally lower.

Economic Calendar

20 DEC AU Nov RBA Foreign Exchange Transactins

EU Dec Consumer Confidence Advance

US Nov Existing Home Sales MoM

Economic Calendar
20 DEC	AU Nov RBA Foreign Exchange Transactions
EU Dec Consumer Confidence advance
US Nov Exisiting Home Sales MoM
US Dec Philadelphia Fed.