Bell FX Currency Outlook: The Australian Dollar fell to 0.8700 on Friday night amid weaker equity markets and a generally negative tone in the financial markets due to some recent disappointing earnings results but has recovered and starts this week at a higher level.

Australia: With the major US equity indices and other major equity indices swinging from gains to losses almost daily after the release of the latest earnings results, some of this uncertainty flows over to the FX market.

The AUD seems to be trapped in a band of .8700 to .8900 of late and we believe it could break out from this band sometime this week since we will be seeing the release of a slew of data which will include the RBA's cash rate decision tomorrow followed by their Statement on Monetary Policy on Friday.

On Saturday the official Chinese PMI manufacturing data for January revealed a figure of 50.5 which met expectations but was down from the 51.0 previous month's reading and is the lowest in 6 months.

Even though Chinese markets are closed for the Lunar New Year celebrations this week (Year of the Horse) we will see later this morning non-manufacturing PMI data for January. Also today locally we will see AIG manufacturing data, house prices, TDMI inflation data from last month
and building approvals from December and the latest ANZ job ad figures.

Tomorrow many analysts believe the RBA may remove its easing bias and move toward a forward guidance strategy saying that interest rates will
continue to remain low but that they see a general pickup in the economy and an improvement in business confidence. On Friday when they release their Statement on Monetary policy we will see what they expect in terms of growth and inflation forecasts.

Majors: The recent data from the US continues to be on the good side with the Chicago PMI data for January coming in higher than estimated at
59.6 but slightly lower than December's reading of 60.8. Consumer spending rose 0.4% last month while the University of Michigan's consumer confidence survey was weaker than the previous month at 81.2 but slightly higher than expected.

Europe's inflation figure for January of 0.7% yoy has raised again deflation concerns and some analysts believe the ECB may lower rates when they meet this Thursday. Unemployment continues at a 12% rate on the continent although slightly better than the 12.1% figure that was predicted. With a weaker EUR the AUDEUR cross rate has moved higher as has the AUDNZD rate.

We expect they may improve further if the easing bias on monetary policy is dropped by the announcements from the RBA this week. Tonight from the US we will see the latest figures on vehicle sales, construction spending and more ISM manufacturing data.
Economic Calendar
03 FEB AU AiG Perf of Mfg Index Jan
AU TD Securities Inflation MoM/YoY Jan
AU Building Approvals Dec

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