Australian Dollar Outlook –7/4/13

Bell FX Currency Outlook: The Australian Dollar is slightly weaker following comments by RBA Governor Stevens made in yesterday's Asian time zone.

Australia: RBA Governor Stevens, in an apparent off the cuff remark yesterday, said the board 'deliberated for a very long time' before deciding to keep its interest rate unchanged. This plus his prepared comments that "we will continue to do our part...to assist the transition in sources of demand that is needed" and that, "we will do what reasonably can be done", certainly justified the suggestion that the board was closer to further policy easing than many thought was the case ahead of yesterday's meeting. The remarks led to fresh selling in the AUD, with the low of reaching 0.9037 offshore. Elsewhere, new concerns over the stability of the Portuguese Government were enough to see Portuguese bond yields spike, though the response in the EUR remained more muted. Developments in Egypt elicited a limited impact on the price of oil overnight, following a rally in oil prices in yesterday's Asian session. Currencies exposed to global energy, such as the JPY, have yet to reflect any discernible reaction. The feeling in the market is that the bottom of the AUD's range is yet to be in place. The currency remains vulnerable to all types of events. In the near term, markets will look to the Q&A session following today's speech from RBA Deputy Governor Lowe for clarification on the policy outlook whilst then we look to the always important US payrolls report this Friday.

Majors: With US markets closed for the 4th July Independence Day celebrations, the ECB's latest policy decisions and the post-meeting press conference from President Draghi are the main event. Assuming no change to key rates, the markets are looking for Draghi to reiterate the preparedness to undertake additional easing measures and say that efforts to improve the flow of lending to SME's is ongoing. He will also stress policy tightening is a distant prospect and if so, this will see the EUR/USD rate steady below 1.3000 the markets believe. The Bank of England MPC holds its first policy meeting under new Governor Mark Carney. A 'no change' is likely. The markets will wait two weeks until the minutes are published to get the first hint of how Mr Carney is viewing matters and what the voting pattern was. US labour data suggests employment conditions in the US have continued to improve and as stated above, the market will focus on the non-farm payrolls print for June released on Friday night, with forecasts of +140k for overall non-farm payrolls which is a little below the median market expectation of +175k.

Economic Calendar

04 JULY AU RBA Phillip Lowe speaks

JN BoJ Governor Kuroda speaks

EU ECB Interest Rate Announcement

US Public Holiday Independence Day

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