Australian Dollar Outlook - 02 July 2014

By @ibtimesau on
Euro and U.S. dollar banknotes
Euro and U.S. dollar banknotes are seen in this picture illustration taken in Prague January 23, 2013. Credit: REUTERS/David W Cerny REUTERS/David W Cerny

Bell FX Currency Outlook: The Australian Dollar has made new year to date highs following yesterday's RBA meeting.

Australia: The Australian dollar touched above the 95 cent level against the USD for the first time since November 2013 as the RBA kept rates on hold at 2.5%. The market took the comments that accompany the decision as less dovish than they were expecting, with the AUD up almost 1 cent since the announcement. The Bank continue to see a "period of stability in interest rates" and although they still expect growth to be a little below trend in the coming year, they see the decline in mining investment being partly offset by the strong performance of the housing market and moderate growth in consumer sentiment. Global risk appetite generally rose yesterday, which helped further buoy the AUD, as manufacturing data out of China beat expectations. The National Bureau of Statistics manufacturing PMI figure was 51, beating last month's 50.8 figure, while the same figure published by HSBC was 50.7, up from 49.4 last month.

The main economic release for today is Australian trade data for May, with the market expectation a deficit of AUD 122M.

Majors: As stated above, there was a general risk-on tone last night with equities in positive territory in both the US and Europe, US yields up and the yen off its six week high against the USD. Despite the increased risk appetite there was some negative data out of Europe which caused the EUR to underperform; German manufacturing PMI missed expectations (52 vs 52.4 expected) as did their unemployment data (increasing 9k), while French manufacturing PMI remained below 50 and the same figure for the Eurozone just missed expectations (51.8 vs 51.9E).

There was better news out of the UK with their PMI beating expectation, recording a figure of 57.5, better than 56.8 expected. The GBP is up another 50 points against the USD.

In the US the ISM manufacturing PMI slightly missed expectations also (55.3 vs. 55.8 expected), as did construction spending, which saw some weakness in the USD and helped drive risk assets (such as the AUD higher). Tonight Eurozone GDP will likely be the focus in Europe, while ADP employment change will be watched closely in the US, especially with non-farm payrolls released on Friday night.

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