Australian dollar coin
A one Australian dollar coin is seen in this picture illustration taken in Sydney, Australia, July 29, 2015. Reuters/David Gray

Bell FX Currency Outlook: The Australian Dollar made new 2016 highs overnight, currently around 0.7350.

Australia: The AUD put in another strong showing overnight, up 0.8% for the session having made a new 2016 high. The main driver overnight was a weaker USD, on the back of some soft data and dovish comments
by the Dallas Fed President, while oil was also stable and the LME base metal prices gained (although iron ore was a little softer). Yesterday’s trade data started the ball rolling for the AUD as Australia’s trade deficit
narrowed more than expected (by around AUD600m) in January to AUD2.9bn from AUD3.5bn in December. The value of exports increased a 1.1% m/m, while total import values declined 1.1% m/m. This continues
the recent run of good data after Wednesday’s GDP announcement. The focus for trading today will be around the retail sales figure released at 11:30am, with the market expecting an increase of 0.4%. Then it will be the US employment data to set direction overnight. A weaker than expected release could see the AUD up above 0.7400.

Majors: US non-manufacturing ISM held steady in February (dropping by just 0.1 point to 53.4), suggesting some stability may be returning to the index following recent declines. The business sub-component jumped
to 57.8 vs 53.9, new orders were slightly weaker at 55.5 vs 56.5, but remain healthy. The employment component dipped to 49.7 vs 52.1, and may downwardly influence expectations for the payrolls report after a
strong ADP report yesterday. Overall the report points to steady growth in the services sector. Dallas Fed President Kaplan (non-voter) gave a dovish speech that saw markets reacted positively. He stated that that
global financial conditions have likely restrained the US economy, “akin to some level of increase in the fed funds rate”. He also said that the FOMC should “avoid having a predetermined mind-set” for policy, and that
although the US economy “will likely be resilient in 2016”, and recent developments “call for patience and further diligence”. The EUR and GBP both made gains against the weaker USD. The EUR was helped by better than expected services PMI and retail sales data. The GBP is up despite UK house price data and services PMI both below expectations. As stated, tonight all eyes will be on the release of US non-farm payrolls, with the report expected to show gains of 195k for the month. Also over the weekend China announces its 2016 GDP forecast.

Economic Calendar 04 MAR

  • AU Retail Sales Jan
  • US Trade Balance Jan
  • CA Labour Productivity Q4
  • US Non-Farm Payrolls Feb

Bell Fx

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