Australian Dollar Outlook - 7 March 2014

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Bell FX Currency Outlook: The Australian Dollar continued its strong run following more positive domestic data yesterday.

Australia: The AUD briefly touched above 0.9105 against the USD last night after further bullish domestic data. Yesterday we saw the release of January retail sales, which came out at 1.2%, much better than the forecast of 0.4% and the biggest rise since February last year. At the same time there was a big surprise to the upside in the trade balance for January.

The market expected a surplus of $0.1b but the actual figure was $1.4b, the biggest surplus in 2-and-half years. This was driven by a 4% increase in exports while imports only rose 1%. December's trade surplus was also revised up from $468m to $591m.All this positive news saw the AUD just from 0.8975 to 0.9030 on the announcement and continued to rally last night, helped with a general risk-on tone from off shore.

With no significant data out today, the focus in the domestic session is likely to be RBA Governor Glenn Stevens' testimony to the House of Representatives Economic Committee, starting at 9.30AEDT. Apart from that markets will be looking towards the all-important US unemployment tonight.

Majors: The situation in the Crimean peninsula has not yet resolved itself, but markets seem to have shifted focus, with news out of central banks the main movers last night. The euro strengthened to a two-month high against the dollar with the European Central Bank (ECB) keeping rates on hold. ECB  president Mario Draghi announced that new inflation forecasts show that the Euro region should approach its target by the end of 2016 and that money markets are under control at the moment, lessening the need for emergency liquidity measures.

The BoE also met last night, keeping rates unchanged at 0.5% as expected, and continuing their economic stimulus now running into its 6th year. Like the EUR, the GBP also rallied off this news. In the US factory orders were slightly weaker than expected (-0.7% vs. -0.5 expected) but the USD weakness was more of reflection of the risk-on sentiment from Australia and Europe.

As stated above, unemployment and non-farm payroll figures tonight will be the big focus of the next 24 hours.

Economic Calendar

  1. 07 MAR AU RBA Govenor Stevens Testimony to Parliament
  2. US Change in Nonfarm Payrolls
  3. US Unemployment Rate

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