Bell FX Currency Outlook: The Australian Dollar is slightly weaker this morning after a continuation of yesterday's moves in markets overnight.
Australia: Overnight, the USD strengthened further against most currencies, with AUD/USD breaking USD0.8900. Oil prices were up solidly
after a report showed US crude inventories fell sharply.
Equities were higher as the USD continued to recover lost ground and US Treasuries sold off further as non-payrolls inspired moves continue to be unwound.
Solid US activity data and a small surprise in the core PPI lifted bond yields, while solid bank earnings helped push stocks to a fresh high. The
EUR, GBP and NZD all sold off alongside the AUD, while emerging markets once again bore the brunt of selloff.
Overall, rates, and the transmission of tighter US financial conditions remains the dominant factor in markets and the US growth story is doing little to support cyclical currencies or assets. Today in Asia, the Australian employment numbers will be the key factor for the AUD.
Labour force data for December is released at 11:30AEDT with expectations that employment rose solidly in December, possibly by around 20K which is enough to keep the employment-to-population ratio unchanged. The unemployment rate is expected to have been broadly unchanged at 5.75%.
Majors: In the US, the Empire (NY Fed) manufacturing survey rose to an 18-month high in January, adding to other indicators that suggest the
December non-farm payrolls data was an anomaly. The Fed's Beige Book stated the "economic outlook is positive in most districts, with some
reports citing expectations of 'more of the same' and some expecting a pickup in growth." Most districts reported that retail spending was higher,
with holiday sales a little better than 2012.
All districts also recorded a further improvement in manufacturing activity. The World Bank now forecasts the global economy to expand by 3.2% in 2014 (revised up from 3% in June), and up from 2.4% in 2013. The Bank also projects the global economy to grow by 3.4% in 2015, with the better figures driven by an improved outlook for developed economies as fiscal headwinds recede.
The US economy is now projected to grow at 2.8% in 2014, Japan by 1.4%, and the Eurozone by 1.1% (up from 0.9% in June). In contrast, 2014
growth forecast for the developing world were cut to 5.3% from 5.6% (with growth is China to slow from 8% to 7.7%), as the global tide of excess
liquidity starts to slow.
16 JAN AU Employment Change / Unemployment Rate
US CPI MoM/YoY
EC CPI MoM/YoY
US Initial Jobless Claims
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