Australian Dollar Outlook – January 15, 2015

Passers-by are reflected on a signboard displaying currency signs outside a bank in Tokyo November 27, 2014. The dollar edged down against the yen on Thursday after lacklustre U.S. economic data pushed Treasury yields lower and dulled investor appetite for the greenback. Reuters/Issei Kato

Bell FX Currency Outlook: Weaker US retail sales helped reverse attempts to drive AUD/USD lower on the back of falling copper prices.

Australia: The AUD is caught in an arm wrestle, weaker commodity prices drove it lower early in the session, specifically the Asian LME metals and Copper but a disappointing retail sales print in the US forced it higher. Local focus is on the December AU labour force report. After November's out-sized 42.7K employment gain, analysts are looking for monthly payback to below trend growth. While there will be some initial reaction to a higher or lower number, it will be more about what the report means for the state of the labour market and what that means for the RBA. Changes in employment, the full-time/part-time split, aggregate hours worked as well of course as the unemployment rate are all important considerations. Australian employment gives AUD some local data to drive direction, while commodity prices and US manufacturing survey results should set global direction.

Majors: A sharper than expected decline in US retail sales dominated, total retail sales fell 0.9% m/m. US Treasuries rallied strongly and the curve flattened further, with 10-year yields at one stage touching 1.78% - the lowest since May 2013. The USD also weakened. The EUR/USD unwound earlier weakness which had followed dovish comments from ECB President Draghi and a favourable opinion from a top advisor for the

European Court of Justice, who concluded that the ECB's Outright Monetary Transactions (OMT) programme was compatible with EU law. European sovereign bonds yields continued to decline on the prospect of imminent policy easing by the ECB, with peripheral sovereigns underperforming. US equities extended their losses for a fourth consecutive session. European shares opened weaker following the sharp fall in base metals prices through the Asian session, with LME copper prices declining 5%.

Economic Calendar

15 JAN AU Unemployment Rate Dec

AU RBA FX Transactions Dec

GE GDP 2014

US NY Empire Manufacting Index Dec

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