Bell FX Currency Outlook: The recent negative tone of the Australian Dollar was lifted after better than expected trade data from Germany, the US and China pushed the currency above 1.0300.
Australia: The release of the RBA's quarterly Statement on Monetary Policy on Friday afternoon saw the AUD retrace its move downward to below 1.0300 as the RBA indicated it had further scope to lower the cash rate if softer economic conditions warranted a more stimulatory policy.
With the release of better than anticipated trade data in Germany followed by similar news in the United States and China, equity markets in Europe had a good day with the important equity indices all rising.
This trend continued into the US session with the major indices posting modest gains and the S&P 500 hitting a new five year high and the NASDAQ touching a 12 year high.
The pervasive feeling by most economists that the RBA will lower the cash rate by a minimum of 50bps to a maximum fall of 100bps by the end of 2013 seems to losing support with some analysts thinking there may only be a decline of 25 to 50 bps by the end of the year.
Germany posted its second highest trade surplus since records have been kept from 1950 of EUR188.1bn in 2012. Although the German economy shrank by 0.5% in the fourth quarter of 2012, the country expanded its imports from the Eurozone by 0.7% while exporting 2.1% less to the region.
Majors: The US trade deficit for December shrank to US$38.5bn instead of the US$45.4bn expected as oil imports were lower than forecast and the trade deficit balance was the lowest in three years.
This will probably result in a higher revised Q4 GDP than the -0.1% figure recently announced. Chinese trade figures were encouraging as well as January's imports and exports were both higher than the year earlier figures.
The trade surplus was US$29.2bn which was up 7.7% from a year ago and above the consensus figure of US$26.6bn. Exports rose 25% and imports 28% although last year's figures might have been affected by the New Year holiday which fell in January last year while it falls in February this year.
Inflation figures for the month were encouraging with a figure of 2% announced as compared to 2.5% a year ago. The EUR was a bit weaker after ECB President Draghi commented that the recent strength of the EUR was affecting the general recovery in Europe.
There was a big sigh of relief after many hours of discussions and a sleepless night produced a new budget for the 27 member Eurozone countries for the seven years (2014-2020) with some small cuts in spending.
The EUR960bn budget now must be passed by the European Parliament. JPY rebounded upward versus the USD after Japan's finance minister said the recent weakness of the JPY had caught the government by surprise.
At the same time the country revealed its lowest current account surplus in almost 30 years. This week we will see no news from China as the country celebrates the New Year holiday (the year of the snake). Later this week we will see the release of Q4 GDP for the Eurozone and the next G20 meeting is being held on Thursday and Friday. Economic Calendar11 FEB AU Hom Loans m/mAU NAB Manufacturing activity indexCH Bank HolidayJP Bank HolidayEU Eurogroup meetingsFor latest pricing and ranges, visit www.bellpotter.com.au