One dollar and 10 cents in Australian currency sit atop a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011.
One dollar and 10 cents in Australian currency sit atop a U.S. one dollar note in this photo illustration taken in Sydney July 27, 2011. Reuters/Tim Wimborne

Bell FX Currency Outlook: The Australian dollar is lower on the back of mixed commodity prices and as pessimism sets in following US Federal Reserve chair Janet Yellen’s Congressional testimony.

Australia: The AUD is trading at USD 0.7100 after markets sold USD heavily overnight on speculation the Federal Reserve may hold interest rates at current levels for the moment. This bouyed the AUD but gains
were capped from mixed commodity prices. The night felt like the markets were feeling disappointment following Fed Chair Yellen’s testimony, who in her testimony the previous eveing, recognised both the underlying strength of the US domestic economy while addressing the potential downside impact of heightened financial market volatility. Everyone acknowkledges this is a tough balancing act to strike when markets are on the edge, especially when one digests that in the past weeks, we have seen developments from the BoJ, the ECB, the removal of any tightening from the Fed and even other central banks acting partly in response to what other central banks are doing. Sadly, the realisation is nigh that in the desire to fix the global economy’s problems via liquidity, more challenges have been created by the mispricing of risk and misallocation of capital. Sobering. Locally, our AUD remains somewhat calm as markets gyrate all around. Equities, commodities, sovereign yields, credit spreads are all on alert. RBA Governor Stevens will provide testimony to parliament, but given how recently the SoMP was released and the price action in other markets, it will not be a key driver today.

Majors: USD/JPY fell to its lowest level since October 2014. EUR strengthened while GBP fell. With concerns about the European banking sector continuing, bank stocks led a sell-off on European equity markets. However, stocks in general are being hard hit globally, particularly economically sensitive ones, as concerns over global growth continue. Oil prices are also lower again in choppy trade, with The SEK is weaker after the Riksbank cut rates by more than expected into negative territory while warning that it is open to additional easing should it be required. More light to safety is expected for now as Friday and concerns remain. Fundamental data will likely be overlooked, and flows will dominate.

Economic Calendar 12 FEB

  • AU RBA Goveror before House of Reps Economics Committee
  • GE CPI & GDP
  • EC Industrial Production & GDP
  • US Uni of Michigan Consumer Sentiment

Bell Fx

[Kick off your trading day with our newsletter]
More from IBT Markets:
Follow us on Facebook
Follow us on Twitter
Subscribe to get this delivered to your inbox dail