Bell FX Currency Outlook: The Australian Dollar is higher after international investors welcomed news of a surge in domestic business confidence.
Australia: It was a relatively quiet night with a weaker US Dollar across the G10 board. Yesterday's NAB Survey bounce was followed by a slight increase in German and steady French business confidence. Japanese small businesses managed a small gain, too. India's rate cut, though largely expected, also lifted the mood.
The exception was US consumers with the Conference Board consumer confidence measure disappointing. The US jobs market holds the key to the Fed's QE plans and the USD and despite better jobless claims of late, the Conference Board "jobs plentiful" index overnight took a step backwards and this dampened USD sentiment into tomorrow night's jobless claims and Friday's payrolls.
Amid this USD weakness, the AUD has lagged adding weight to those who feel we are reaching its highs. Thursday's RBA credit will be closely watched.
Prime Minister Gillard is giving a speech today to the National Press Club, reportedly covering priorities of Labor's reelection pitch and structural budget savings related to the need to fund its national disability insurance scheme and education reforms.
Majors: EUR rallied after the US confidence report and held its gains and it is fair to assume the increase in payroll tax this month in the US and the lack of a permanent fiscal solution is weighing on US consumers' minds.
Not even another rise in US house prices was sufficient to turn USD sentiment sufficiently. NOK and SEK had gains and the JPY is holding on to most of its recent weakening while the AUD, NZD and CAD all recovered a little against the EUR. In Europe, French consumer confidence was unchanged in January and only a little above the lows since the EUR crisis started.
Rising unemployment and a deteriorating growth backdrop are expected to keep confidence subdued. Spanish retail sales contracted 10.2% (annual) in December which was a timely reminder of the extent of weakness in the EUR area.
30 JAN EU Jan Economic confidence
UK Dec Nat Consumer credit
US Jan ADP employment
US FOMC policy decision
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