Bell FX Currency Outlook: The Australian Dollar bounced overnight despite a strengthening US Dollar following strong US Q4 GDP data.
Australia: In the United States, Q4 GDP rose at an annualised rate of 3.2%. This followed a healthy rise of 4.1% annualised in Q3 and makes for the strongest half year in a decade, despite the three week Federal Government shutdown at the start of the quarter.
As expected, growth was driven by an upswing in consumption, business investment and net exports. The strong but in-line with expectations Q4 US GDP print drove sentiment and justified the Fed's tapering decision.
Stocks rallied and the USD rallied broadly against its major peers. The AUD was the only exception and it is now trading at 0.8785. Yesterday afternoon, the AUD was stuck in the 0.8720-0.8730 range after the final reading of the Chinese HSBC manufacturing PMI came in at 49.5 in January, down from 50.5 in December, and slightly weaker than the flash estimate of 49.6.
Today in Australia, the RBA releases the private sector credit data for December. Credit growth continues to be weak, running at just 0.3% permonth with all growth accounted for by housing credit (which is only growing at 0.5%). Business credit and personal credit remain soft, recording no net growth over October and November.
The Q4 PPI is also released this morning. This domestic data on credit may provide a few more clues about the state of the economy ahead of the RBA's decision next week.
Majors: As stated above, the US Dollar had a strong night out. The solid US GDP report led the charge, with the US economy growing 1.9% in 2013 with a rise of 2.8% expected this year. Additionally, strong earnings and some stability in emerging markets assisted equities gain.
In currency markets, emerging market currencies pared recent losses after the Russian central bank stepped in and supported the rouble by pledging 'unlimited' intervention. That said, broader issues remain unresolved and it remains to be seen how long the calm can last. Tonight, US personal incomes and spending are expected to show a 0.2% gain in December, while the Chicago PMI is expected to be little changed at 59 in January.
The University of Michigan's consumer confidence reading is expected to be revised higher to 81.0 in January from the 80.4 preliminary reading, butthat is still lower than December's 82.5. European CPI and unemployment, and Canadian GDP data are also out tonight.
Economic Calendar31 JAN NZ RBNZ Govenor Wheeler SpeaksAU Private Sector Credit MoM/YoYAU PPI QoQ/YoY