Australian one dollar coins
A handful of Australian one dollar coins is shown in Sydney, February 18, 2004. Reuters/Tim Wimborne

Bell FX Currency Outlook: The Australian Dollar is up around0.7400 this morning after making solid gains on Friday.

Australia: The AUD made strong gains on Friday, initially rallying afterthe release of the RBA Statement of Monetary Policy before someinteresting moves overnight as the US non-farm payrolls data wasreleased. The highlights of the SoMP included lower forecasts for bothgrowth and unemployment, and higher forecasts for underlying inflation.Real GDP growth is now expected to be between 2% and 3% in 2016,down from an earlier forecast of 2½-3½%, with growth in 2017 set to stepup to between 2¼-4%. The unemployment rate is now expected to peakjust above 6%, but remain close to this level over the forecast period.While this is an improvement from the May forecast which hadunemployment peaking closer to 6½%, the Bank is likely to feeluncomfortable with such a prolonged period of elevated unemployment. Atthe same time housing finance data showed a solid 3.3% rise in June,(although this was not enough to offset the large decline in May). Growthwas entirely driven by owner-occupiers, with investor housing financefalling for the second consecutive month. As stated above, the AUD ralliedoff the back of all this news before being whipsawed around after the USemployment data on Friday night, initially falling 60 points before bouncingand making new session highs above 0.7400.

Majors: July saw another solid non-farm payrolls print, with the +215koutturn and 14k of upward revisions for the prior two months. Detailsshowed broad-based gains, including health & education (+37k), retail(+36k) and manufacturing (+15k), with the unemployment rate steady at5.3%. If hiring remains firm in August, the Fed appear odds-on to starthiking in September, with the market probability of a September hike risingas high as 58% from around 50% beforehand, and is currently 54%. Overthe weekend China’s trade data showed unexpectedly weak exportnumbers and a slightly deeper than expected contraction in imports, whileCPI inflation rose to 1.6% y/y in July, from 1.4% in June, driven by risingfood prices and PPI declined further to -5.4% y/y in July, compared with -4.8% in June. It should be a quiet day on the data front, with the mainevent being the Fed’s Lockhart speaking tonight.

Economic Calendar 10 AUG

  • JN BoP Current Account Adjusted Jun
  • JN Consumer Confidence Index Jul
  • US Labor Market Conditions Index Jul
  • US Fed’s Lockhart Speaks to the Atlanta Press Club

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