Bell FX Currency Outlook: The Australian Dollar is close
to parity with the USD after the weekend's
announcement of China's second cut this year in the
reserve ratio requirement for banks has provided no
relief from the ongoing concerns of Europe.
Australia: The AUD has continued to drift toward parity as financial
markets continue to be concerned about the situation in Europe, where
there is more discussion about the real possibility of Greece leaving the
EUR and the inability thus far of various political parties in Greece being
unable to form a new coalition government. If this is not possible in the
very near term another election will be necessary in June. The RRR for
Chinese banks has been reduced again this year to a level 20% in
response to weaker than predicted industrial production figures. Most
analysts expect another reduction in the next few months as authorities
continue to try and mange a soft landing for China that has huge
implications for the AUD. We would have expected a small lift in the AUD
as this news filters through the market today but the short term trend
downward appears in place. Also contributing to the negative sentiment in
the market is the US$2bn trading loss announced by JPMorgan Chase
late last week that has affected the US equity markets more so than other
markets. Today in Australia we will see housing finance data for March
and RBA Deputy Governor Lowe will be speaking in Melbourne.
Tomorrow, the RBA's minutes from their meeting earlier this month will be
released and may provide more hints to their likely attitude to future rate
cuts in June. With stronger than anticipated jobs data last week the
certainty of another rate cut next month may be diminishing.
Majors: Attention has again shifted to the woes of the Spanish economy
as the financial world awaits the next move in Greece. Yields continue to
rise again on Spanish government debt and are now above 6%, as plans
were announced to inject EUR15bn into the banking system. This figure is
deemed by many analysts to not be enough to allay concerns of the health
of their banks. Better than anticipated preliminary consumer confidence
figures from the University of Michigan in the US were released on Friday
for May that revealed a jump in the index 77.8 from the final April figure of
76.4. Most analysts expect the US economy to continue its modest
improvement in coming months although the lower than expected jobs
growth is a concern upward revisions to previous monthly figures gives
most analysts comfort that the US economy will continue to grind higher.
Economic Calendar
14 MAY AU RBA Deputy Governor Lowe gives speech in Melbourne
AU Home Loans APR
EC Euro Zone Industrial Production APR
EC ECB Announces Bond Purchase