Bell FX Currency Outlook: The Australian Dollar has rebounded half of one US Cent on the back of weaker-than-expected US economic data overnight, but this data's impact should be short lived.

Australia: This morning, the AUD is back at USD 0.9400 up from 0.9360 cents on Wednesday. Data released overnight showed the US economy
shrank 2.9% (annualised) rate in Q1, the sharpest contraction in five years.

The market had expected a more modest 1.8% decline. The revision to the Q1 data was the largest since the series began in 1976, with the US
economy contracting by the largest rate since early 2009. However, a solid bounce-back in Q2 GDP is likely following weather impairments to the Q1 data.

More importantly, other US data such as payrolls growth, unemployment and business surveys are all pointing to a solid pick-up in US activity. US

Treasuries rallied across the curve following the data but moves were pared late in the session. The AUD was also boosted by core European bond yields trading sharply lower in response to escalating geopolitical tensions, with insurgents appearing to be gaining a stronger foothold in Northern Iraq and on reports the US is considering a new round of sanctions on Russia in response to the Ukraine crisis.

In Australia today, the quarterly ABS Job Vacancies series for May is published. Tonight, the US PCE deflator for May is published and the market expects this measure of consumer price inflation to have lifted broadly in line with last week's higher-than-expected CPI inflation data.

The general view is US inflation has bottomed and will lift gradually through this year and next, which could be the influence the AUD requires to change direction and head lower in time, which will be much more in line with most people's view, including the RBA.

Majors: As written, in currency markets, the sharper-than-expected downward revisions to Q1 GDP took its toll. US yields eased back, the USD weakened and risk sentiment was buoyed. With respect to tonight's PCE deflator, the FOMC majority is seemingly not concerned with the
latest inflation readings. All things considered, inflation is still very low, however, any upside surprises have the potential to lift bond yields and
(probably) support the USD.

The latest weekly US jobless claims numbers are released as well, and the 4-week average has recently been tracking just above 310k, consistent with US payrolls growth in excess of 200k a month. All in all, the market is getting more comfortable with the view towards sustained US strength ultimately leading to a stronger USD.
Economic Calendar
26 JUN AU Job Vacancies
UK BoE Governor Carney Speaks in London on Financial Stability
US Personal Spending May
US PCE Deflator MoM/YoY May

For latest pricing, ranges visit www.bellpotter.com.au