A man walks past various currency signs, including the dollar (top R), Australian dollar (top L), pound sterling (centre L) and euro (bottom L), outside a brokerage in Tokyo October 28 2014.
A man walks past various currency signs, including the dollar (top R), Australian dollar (top L), pound sterling (centre L) and euro (bottom L), outside a brokerage in Tokyo October 28 2014. A year-long investigation into allegations of collusion and manipulation by global currency traders is set to come to a head on Wednesday, with Britain's financial regulator and six big banks expected to agree a settlement involving around ?1.5 billion ($2.38 billion) in fines. The settlement comes amid a revival of long-dormant volatility on the foreign exchanges, where a steady rise of U.S. dollar this year has depressed oil prices and the currencies of many commodity exporters such as Russia's rouble, Brazil's real and Nigeria's naira - setting the scene for more turbulence on world financial markets in 2015. Picture taken October 28, 2014. Reuters/Yuya Shino

Bell FX Currency Outlook: The Australian Dollar has opened trade this week just below .7200 after currency markets took a
breather after the rate rise announcement by the US Federal Reserve on Friday morning.

Australia: There is very little local data this week and later today we will see the final figures for GDP growth in Q3 in the US. The second estimate was 2.1% but many analysts expect the final figure to be 1.9%. With US equity markets sharply lower on Friday concerns remain about the level of world growth and commodity prices in general continue to slide. We expect the AUD to drift lower over coming weeks as the terms of trade continue to deteriorate although we do not see a sharp selloff in the next few weeks. Between now and the end of the year currency markets could be thin and some small sharp movements could occur.

Majors: The Bank of Japan’s meeting on Friday revealed more easing measures although BofJ Governor Kuroda said they were “technical”. Some of the changes included a lengthening of the maturity of JGB’s purchased from 7 to 10 years to 7 to 12 years but the level of purchases will remain at JPY80trillion per annum. They increased the weighting of individual REIT’s they can buy from 5% to 10% and also announced a new fund to buy new EFT’s from April, 2016 of JPY300bn which is in addition to the ongoing purchases of EFT’s of JPY3trillion per year. In the US, this month’s preliminary Markit services PMI came in at 53.7 which was lower than the 55.9 figure expected and lower than last month’s figure of 56.1. The Markit composite figure was 53.5 which was lower than last month’s figure of 55.9. Manufacturing activity from the Kansas City area fell to -9 versus the 2 figure expected. Federal Reserve Governor Powell said that in regard to future interest rate policy moves he would looking to further progress in the labour market and progress on inflation. Crude oil stockpiles in the US hit the highest level since 1930. The outcome of the Spanish elections will not be know until later today but its outcome is not likely to affect the level of the EUR.

Economic Calendar 21 DEC

  • NZ Westpac Consumer Conf 4Q
  • NZ Credit Card Spending Nov
  • US GDP Q3

BellFx

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