Bell FX Currency Outlook: The Australian Dollar has consolidated after its recent fall last week precipitated by the US Federal Reserve's statement that the pace of quantitative easing could begin to taper later this year if unemployment in the US continues to fall and has opened this morning just above 0.9300.

Australia: Although the combination of lower cash rates in Australia, a slowing down in Chinese growth levels and a reduction in the amount of offshore buying of Australian Commonwealth and state government securities has moved the AUD to levels we have not seen in the last three years, more analysts are predicting further falls in the AUD mainly as the USD continues to strengthen in light of increasing interest rates as the largest economy in the world grows.

Locally there is very little news this week with the major announcements of job vacancies from the ABS due on Thursday followed on Friday by growth in private sector credit. In the US there are a number of Federal Reserve members that will be speaking at various forums and their words will be dissected and analysed thoroughly for further clues to the potentially timing of the tapering of the QE program.

Several major banks have recently updated their forecast for the AUD over the next 12 months with many now predicting that the local currency will touch a level of 0.8600 versus the USD twelve months from now.

Majors: As financial markets deal with repercussions of the US Fed's recent announcement on quantitative easing, the yields on 10 year US Treasuries hit their highest yield since August, 2011 of 2.53%.

The increased volatility in financial markets continued on Friday with all major European indices registering falls well in excess of 1% although the major US equity indices managed only small gains although trading was over a wide range.

The EUR traded below 1.3100 versus the USD for the first time in recent weeks as the USD maintains its newfound strength. With AUD cross rates falling to levels we have not seen in the last three years we expect more volatility in coming months as the AUD settles to lower levels against the USD although we expect the fall in cross rates to moderate.
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