Australian Dollar Outlook - 05/21/2012

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Bell FX Currency Outlook: The Australian Dollarcontinues in languish in the 0.9800's after the G8meeting held on the weekend produced no "revelations"of how to deal with the economic woes of Europe.Australia: The G8 meeting at Camp David in America that broughttogether the leaders of the USA, UK, Germany, France, Italy, Japan,Russia and Canada along with two representatives of the European Unionproduced nothing really new in terms of initiatives to soothe the concernsof financial markets about the state of Europe. The meeting's officialannouncement of "We agree on the importance of a strong and cohesiveeuro zone for global stability and recovery, and we affirm our interest inGreece remaining in the euro zone while respecting its commitments" willdo little to calm markets concerned about the potential contagion effects ofGreece leaving the EUR. Major European and US equity indices were allmodestly lower on Friday night with the eagerly awaited IPO of Facebookon NASDAQ underwhelming the market with the underwriters buyingshares to ensure it finished the day just above its issue price of USD38 pershare. Gold continued its firmer tone rising for a second day in a row tojust under USD1,593 an ounce. There is very little data in Australia thisweek with the HSBC flash PMI data for May due to be released onThursday. It must have been the weekend for politically correctannouncements with Chinese Premier Jiabao saying "We continue toimplement a proactive fiscal policy and a prudent monetary policy, whilegiving more priority to maintaining growth". The market expects we maysee another reduction in the ratio reserve requirement for Chinese banksin the next month or two but this is unlikely to alter the bearish tone infinancial markets in the short run. We see AUD remaining under pressure.Majors: After the rash of economic data in the last few weeks, this weeksees only minor data releases offshore as well with existing and newhome sales figures in the US due on Tuesday and Wednesday followed bydurable goods orders on Thursday and consumer sentiment on Friday.With two major US retailers, JC Penney and Abercrombie & Fitch,reporting disappointing earnings results on Friday that saw their shares fall20%, investors will be looking for further clues that the US recovery,although modest, is still continuing. New Zealand is releasing their budgeton Thursday where PM John Key will announce a conservative budgetwith plans to bring in a surplus in the 2014/2015 financial year. All eyescontinue to be focused on the financial and economic dramas in Europeand Greece.Economic Calendar21 MAY CA Public HolidayEU ECB Announces Bond PurchasesFed's Lockhart (VM) Speaks on Monetary PolicyJN All Industry Activity Index APR

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