Bell FX Currency Outlook: The Australian Dollar traded below parity on Friday night for the first time since June, 2012 as the USD moves upward against most major currencies.
Australia: The AUD has started this week's trading slightly below the parity level as most commentators jumped on the bandwagon and predicted a slow grind downward for the local currency.
With the AUD trading around 1.0250 after last Thursday's employment figures were released to a level below parity in less than two days of trading is the first significant break downward we have seen for many months.
With rumors that investor George Soros was shorting the AUD, added to the negative tone of the AUD. Today we will see the release of more local data with the NAB business survey due at 11:30 AEST as well as owner occupied home loan approval information.
Mid-afternoon we will see more data from China with industrial production, retail sales and fixed asset investment for
April due for release. As always this could influence the direction of the AUD in late afternoon trade. Tomorrow night we will see the release of the Australian federal budget for 2013-2014.
We do not expect the budget release to have much an influence on FX markets since events at the moment are really being driven by the strength of the USD.
Majors: Much of the movement in the AUD is due to a growing feeling by many analysts that the US Federal Reserve will start to wind back their USD85bn monthly program of purchases of US Treasury securities and mortgage backed securities in the near future.
Since this program cannot last forever, there will be an increase in interest rates down the track. This helped push the EURUSD below the 1.3000 mark while the JPY continued to weaken and traded above the USDJPY100 level again.
The G7 finance ministers met over the weekend and ECB President Draghi said they were considering buying asset-backed securities to provide further support to the EUR zone since the recent reduction in the cash rate from 75bps to 50 bps was greeted unenthusiastically by the market.
It appears Japan's intention to weaken the JPY will be tolerated for now but we could be getting closer to a time when the ECB and other central banks start to say "enough is enough".
13 MAY AU NAB Business Confidence Apr
CH Industrial Production Apr
CH Retail Sales Apr
US Retail Sales Apr, Business Inventories Mar
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