Australian Dollar Outlook - February 5, 2014

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By Christine Gaylican | February 5, 2014 12:23 PM EST

Bell FX Currency Outlook: The Australian Dollar rises above 0.8900 on Reserve Bank comments.

Australia: As expected, the RBA left its policy rate unchanged at 2.50% yesterday. The Governor's statement following the meeting, however, was
very different to recent months and contained a number of important developments in the Bank's thinking on the economy and monetary policy.


US dollar bills. (Reuters)

Most notably, there was a discrete shift in the Bank's thinking about its policy bias. Monetary policy was assessed to be "appropriately configured"
to foster sustainable growth in demand and inflation.

Furthermore, this neutral bias statement was qualified by "the most prudent course is likely to be a period of stability in interest rates". This latter statement may well be RBA forward guidance, suggesting that rates will not rapidly turn around and rise.

The AUD was also no longer described as "uncomfortably high" and the Bank was more constructive on the domestic economic outlook (although some caveats remain).

Majors: In Europe, there were small losses in most equity markets despite better news in the banking sector (led by UBS) and the bounce back in US shares. Not much in terms of economic data, with only the PPI released which came in at 0.2%mom/-0.8%yoy in December as expected. The EUR has been little changed overnight.
Economic Calendar
05 FEB AU AiG Perf of Services Index Jan
AU NAB Online Retail Index Dec
US ADP Employment Change Jan
US ISM Non-Manf Composite Jan

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(Photo: / )
US dollar bills. (Reuters)
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