Bell FX Currency Outlook: The Australian Dollar hits a 3-week high overnight by trading through USD 1.0300 assisted by weakness in the New Zealand Dollar.
Stacks of euro, Swiss franc, and U.S. dollar banknotes are displayed in a bank in Bern, Switzerland in this file photo.
Australia: This morning the AUD has been trading above USD 1.0320 which is well up from yesterday afternoon's ~ 1.0280 and in so doing has reached its highest level since 22 February 2013.
It managed this during risk-averse trading in the US and European sessions overnight. The rise may be partly due to weakness in the NZD which has surged against the AUD since the start of the year.
For the AUD today, we expect follow up demand, after some strong buying yesterday from offshore banks. The AUD is also finding support with the EUR, which has reached 0.6929 against the GBP, the highest level since 1984.
The AUD is also being supported with developments in NZ, as they suffer severe drought which now covers the country's entire North Island.
Additionally, the AUD/GBP cross is at 28 year highs. We believe the foreign direct investment (as mentioned above) is the key source of support for the AUD, with participation from large scale LNG projects and investment in real estate from overseas investors key.
This fundamental layer of support goes some way to explaining why the AUD has held up over recent months. If the domestic market continues to price out rate cuts the currency should receive further support.
We see the AUD holding these recent gains for now, with potential to test resistance levels, with the next level being touted as 1.0340.
Majors: The EUR remained within its recent range while the GBP traded heavily once again. Weakness in the GBP has stemmed from market and
press speculation that the Bank of England may amend its policy framework when the new Governor takes office in July.
In practical terms, the speculation is that the bank would adopt an ever looser monetary policy. Financial markets are fairly steady in general with European and US equities little changed overnight after some weakness in China and Japan stock markets yesterday, the former reflecting disappointing data over the weekend.
Commodities were generally stronger with oil, gold and base metals all up by at least 0.50%.
13 MAR AU Jan Hone Loans MoM
AU Mar Westpac Consumer sentiment
EU Jan Industrial Production
US Feb Advance retail Sales
For latest pricing, ranges visit www.bellpotter.com.au
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