Bell FX Currency Outlook: Australian Dollar peaks at a 2-week high as the United States avoids a fiscal cliff.
Australia: The Australian Dollar extended its rally seen late in the Asian session as US lawmakers finally reached a deal to extend unemployment benefits and tax cuts for 99 per cent of Americans.
The local unit traded back above 1.0500 against the Greenback in overnight trade as US Congress approved a bill rolling back a package of tax hikes and spending cuts that had threatened to push America back into recession.
Optimism returned to the market as the "fiscal cliff" was effectively avoided; a move which saw a solid rally in risk currencies and both the US dollar and Japanese Yen lower.
The sharply higher iron ore price prior to New Year's coupled with an increase in oil prices also gave momentum to the AUDand the CAD.
Japan is again on holiday today so thin trading conditions are expected for the Asian session. Chinese Non-manufacturing PMI data is due at midday today, although with little economic data to focus on we expect the AUD to remain firm on this rally.
Majors: US equities rose sharply following the hard-fought "fiscal cliff" deal and better than expected US manufacturing data. US lawmakers will face more intense budget battles over the next two months on spending cuts and an increase in the nations limit on borrowing.
The US still faces a potential default if this is not done. The DJIA rose 1.7% to 13,323 with the S&P 500 holding onto early gains to end 1.8% higher at 1,451. European equities were also higher overnight with both the German DAX and FTSE rising 2.2% to 7,779 and 6,027.
Oil prices were higher as US ISM manufacturing survey printed better than expected at 50.7 in December. Brent rose 0.5% to USD 112.3 per barrel while WTI futures rose 0.3% to USD 92.9 per barrel.
Metal prices were also higher overnight with commodity prices ending mixed. Tonight shall see US employment data due along with the FOMC meeting minutes.
Economic Calendar3 JAN CH Non-Manufacturing PMIGE Unemployment ChangeUK PMI ConstructionUS ADP Employment ChangeUS Initialjobless claimsUS FOMC Meeting Minutes from December meeting
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