Australian Dollar Outlook - 5 February 2013

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Bell FX Currency Outlook: The Australian Dollar remains steady ahead of the RBA meeting later today.

Australia: The Australian Dollar has opened little changed this morning despite sharp falls in European stock markets overnight. The local unit seemed to sail through relatively unscathed as fears of political turmoil in Europe hit markets.

A selloff in all things EUR provided a layer of support above 1.0400 for the AUD against the Greenback. Yesterday's softerdomestic building approvals managed to only scratch the lustre off the AUD/USD for a moment which dipped briefly after the data.

The RBA is due to hold its first board meeting for 2013 at 2:30pm today. The Central Bank cut the cash rate a quarter of a per cent at its last meeting in December.

The currency could well push back toward 1.0400 if the Bank doesn't ease rates, although markets will watch the accompanying statement for any bearish tone. Australian international trade data for December will also be released at 11:30am today.

Majors: Markets were jolted overnight as corruption allegations have pressured Spanish Prime Minister Mariano Rajoy to resign, and news that the former Italian prime Minister Silvio Berlusconni - who some deem as fiscally irresponsible, has shown solid gains in polls ahead of elections due later this month.

European equity markets closed around 3.0% lower with the German DAX falling 2.5% to 7,638 while the FTSE was 1.6% lower at 6,247. The unfolding scandal in Spain will likely place considerable pressure on government bond yields in the coming days with returns on Spanish bonds jumping overnight.

US stocks retreated in midday trading after their dramatic surge on Friday which took the DJIA above 14,000 points. Slightly disappointing US factory orders for December added pressure with the S&P 500 falling 0.8% to 1,500 and the DJIA ending 0.7% lower at 13,907.

Metal and commodity markets were mixed overnight but generally weaker whilst the "risk-off" tone sent spot gold prices 0.4% higher to USD 1,673.6 per ounce.

Tonight will see Eurozone Retail Sales figures and Italian Prelim CPI, the US will see the release of Non-Manufacturing PMI data.

Economic Calendar05 FEB AU RBA Board Meeting FebAU House Price Index Q4US ISM Non Manufacturing Composite JanCH HSBC Services PMI

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