Australian Dollar Outlook - Feb. 25, 2016

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

Bell FX Currency Outlook: The Australian Dollar softened overnight as financial markets had a risk-off tone in equities with oil following the same trajectory.

Australia: The AUD continues to track global sentiment. Higher volatility returned to global markets over the past couple of days. The big concerns haven’t disappeared and will continue to provide anxiety to markets; China and the yuan, global growth, negative interest rates and decisions by central banks, with this last point being critical. The feeling is clear - if bad news is now actually recognised as just that, being bad news, and if that leads to the implication of more central bank posturing and action, then the world has changed in a fundamental way since the GFC. Looking at the AUD and commodity prices, LME Copper prices hardly moved, while the Chinese iron ore price is only slightly higher at $51.64 (iron ore has rallied 34% from its 11 December low throughout the period of international market and commodity volatility). Locally, Australian private capital expenditure is announced today and is expected to have declined in Q4, meaning the outlook for non-mining capital expenditure is likely to remain subdued. Tonight, the financial markets will look various Fed speeches as well as weekly jobless claims and the January durable goods orders for
further direction.

Majors: Looking at the Majors, the short term upward trend for crude oil still remains intact despite the disappointment that OPEC supply is unlikely to be cut. Crude oil prices have made higher lows on each of the
downswings over the past ten days. A key test is whether WTI prices can break USD34/bbl in the next week and maintain the recovery. The tone of markets was weaker. GBP/USD broke support as it continues to find its level after the ‘Brexit’ lines were drawn. USD/JPY broke below support as well, and is testing cycle lows as the debate of the BoJ continues. Market sentiment remains weak going into the end of February.

Economic Calendar 25 FEB