Forex daily analysis from FIBO Group

[FIBOgroup]

15.01.2015 - Strong employment data boosts Australian dollar

The Australian dollar is trading sharply higher today after strong employment data and weak US retail sales figures pushed the currency back beyond the US82.00 cents mark.

At 4.45pm (AEDT) the Aussie dollar was trading at US82.08 cents up from US81.48 cents in yesterday’s trade.

Data from the Bureau of Statistics showed the unemployment rate fell to 6.1% in December below analysts’ estimates of 6.3%.

Even more surprising was the number of new jobs created, with the figure coming in at 37,400 well above expectations of 5,000 and unlike last month, the rise was mainly attributed to full time jobs.

Economists from UBS welcomed the news by noting that this is another step in the right direction after the recent rise in job advertisements and noted,

"Today's labour market data was clearly much better than expected , with a welcome lift in jobs growth to a near four-year high of 1.9 per cent year-on-year, to finally be more consistent with the leading indicators of employment, which we have long flagged as pointing to an imminent pick-up,"

Also giving a boost to the Australian dollar was the weak retail sales data out of the US yesterday which fell by 0.9% against analysts ‘expectations of a 0,1% fall casting doubt on the so called recovery of the US economy.

Brushing of the number as a cause for concern and looking at the big picture was Guy Berger, U.S. economist at RBS Securities Inc who has been one of the best forecasters of US retail sales for the past 2 years,

“Maybe the optimism a month ago got a little too heated, Its a weak number but it follows some really strong ones and I don’t think it changes my general feeling on how the economy and consumers are doing.”

 

[FIBOgroup]

16.01.2015 - Australian dollar may benefit from Swiss move

The Australian dollar is holding above the US82.00 cents mark today as disappointing data out of the US and a shock move by the Swiss central bank provides some support to the currency.

At 8.45pm (AEDT) the Australian dollar was trading at US82.19 virtually unchanged from yesterday’s price of US81.20 cents.

Jobless claims in the US jumped by 19,000 to 316,000 a Labor Department report showed, their highest level in 4 months and against analysts’ expectations of 291,000.

The numbers may be a little bit distorted, as there is usually a high number of temporary workers dismissed at the start of the New Year after the busy period in the run up to Christmas and some analysts expect the employment market to continue on from its solid performance in 2014

"We attribute the spike to the seasonal adjustment process," said Jesse Hurwitz, economist at Barclays Bank. "We expect initial and continuing claims to resume their downward trend in the coming weeks and reflect broader improvement in labor markets."

The Swiss central bank yesterday decided to end it peg against major currencies, which saw the Swiss Franc rally up to 30% against the Euro before finishing the day around 15% higher.

One of the beneficiaries of this surprise move could be the Australian dollar as Investors bail out of the Euro and seek higher yielding currencies like the Aussie.

CBA chief currency strategist Richard Grace noted,

"You've got some participants shuffling out of euros for fear of capital erosion on their reserves and holdings. They're looking for higher yielding currency assets and that includes the Australian dollar,"

"Going forward, the absence of this large buyer of euros in the market means the Aussie should trade a little bit higher against the euro. You then come back to the fundamentals without this [partial] distortion occurring,"

 

[FIBOgroup]

19.01.2015 - Australian dollar a definite sell

The Australian dollar is trading in a tight range today holding up pretty well after last week’s shock decision by the Swiss Central Bank to lift the ceiling on the Swiss Franc against the Euro, which sent currency markets reeling, and saw the Aussie tumble against the US dollar.

At 1.55pm (AEDT) the local currency was trading at US81.22 cents slightly down from US81.32 cents at close of trade on Friday.

Also helping the Australian dollars cause today was the release of new motor vehicle sales in Australia which rose a seasonally adjusted 3.0% to 93,903 in December according to the Australian Bureau of Statistics although the overall picture shows total sales are now a seasonally adjusted 1% lower than a year earlier.

The ride for the Aussie dollar above US82.00 cents is not expected to last for long according to BlackRock head of fixed income Stephen Miller who says the overall picture of the Australian economy isn’t good and we may see the dollar significantly lower in the next few months,

"The Australian dollar is a sell. The economy is weaker, terms of trade are down, we have sub-trend growth and potentially the lowest nominal growth in 50 years”

"There are lots of headwinds and that will be reflected in our currency. I won't be surprised if we see below US70 cents in the first half of 2015."

BlackRock, the world’s largest asset manager has been calling for the Australian dollar to fall further for quiet sometime.

 

[FIBOgroup]

20.01.2015 - Australian dollar pressured by Chinese growth

The Australian dollar is trading lower today after the latest GDP figures from China confirmed most analyst’s fears that is the Chinese economy is heading for hard times.

At 7.30pm (AEDT) the Australian dollar is trading at US81.96 cents down from US82.09 cents in yesterday’s trade.

GDP in the world's second-largest economy rose by 7.4% last year according to China's National Bureau of Statistics coming in under the government’s target of 7.5% although slightly above analysts’ expectations of 7.3%.

The quarterly December GDP numbers were the worst performer coming in at 1.5% against a consensus of 1.7% and well down on last quarters figure of 1.9%

This was China’s slowest growth in 25 years which doesn’t sit well for Australia as any recovery in the Australian economy will be closely connected to China, and in particular the demand for Iron ore and other commodities from the land down under.

The Aussie dollar initially welcomed the news but then pulled back after traders digested the figures according to Commonwealth Bank currency strategist Joseph Capurso who noted,

"At first, markets bid up the Aussie because some of the data were a bit better than expected but then the Aussie gave up all of those gains,"

"The quarterly GDP number shows the Chinese economy is still continuing to slow”.

"The only reason the annual number was better was because of upward revisions to previous quarters - that's why the Aussie fell away about an hour after the data came out."

Adding fuel to the fire, the Chinese government have predicted a further slowdown in the economy this year, especially the real estate market that they believe will continue its downward trend after falling 4.5% in 2014.

Looking ahead at the difficulties China faces Premier Li Keqiang on Monday mentioned,

"As the global economy is undergoing a deep restructuring and slow recovery, China's government will likely face heavy tasks in tackling the difficulties"

 

[FIBOgroup]

21.01.2015 - Falling Australian dollar hits consumers pockets

The Australian dollar is under pressure today after a report from the International monetary fund showed that they expect a slowdown in global growth this year adding to the woes of the commodity based currency.

The IMF noted the expected weakness in the Eurozone, China, and Japan will be a drag on the world economy and limit growth to 3.5% down from their previous forecast of 3.8%.

Westpac senior market strategist Imre Speizer said the currency received a double hit in the last couple of days starting with poor data out of China yesterday.

“Sentiment soured slightly amid a global growth downgrade from the IMF and lower oil prices,” he said.

“The shift in global sentiment overnight has given the Australian dollar a slightly negative hue on the day.”

As the Australian dollar continues to fall, more and more Australians are choosing to stay at home rather than travel overseas according to data from St George Bank.

The report shows that up to 45% of Australians are putting off International travel because of the falling Aussie dollar.

The TRA’s assistant general manager Tim Quinn said during the last year there has been a significant reduction in Aussies travelling abroad.

“There has been a real sudden decline in Australians’ propensity to travel overseas,’’ he said.

“Following significant year-on-year increases in outbound travel commencing in the mid-2000s, the rate of growth in outbound trips is now showing signs of softening compared to when the Aussie dollar was around parity with the US dollar”.

“It’s domestic tourism which has picked up, driven by solid growth in the visiting friends and relatives segment, a segment worth $12.4 billion.”

 

[FIBOgroup]

22.01.2015 - Australian dollar braces for rate cut

The Australian dollar took a dive yesterday after a shock decision by the Bank of Canada to cut Interest rates and speculation that the proposed ECB stimulus plan will be much larger than most analysts expected.

At 5.40pm (AEDT) the Australian dollar is trading at US80.68c down from a high of US80.32c in yesterday’s trade

The Bank of Canada, in a surprise to the market cut its benchmark rate to 0.75%, from 1.00% in an effort to prop up the economy after lower inflation, and to offset the fall in oil prices, which have fallen more than 50% this year

Westpac senior currency strategist Sean Callow noted that the Australian dollar reacted negatively to the decision, dropping sharply after the announcement,

"The Australian dollar and the New Zealand dollar tumbled in sympathy with the Canadian dollar as the Bank of Canada delivered a shock rate cut," he said.

"It is very rare for the Australian dollar to respond to Canadian news but markets are obviously edgy about the Reserve Bank of Australia interest rate outlook."

“The Reserve Bank of Australia should open their eyes and use this as a wakeup call,” noted analysts from Fibogroup forex brokers

The main factor in the Canadian banks decision to cut Interest rates was the sharp fall in oil prices and with Australia’s biggest commodity Iron ore suffering the same fate at the moment the Reserve Bank of Australia may have to follow suite and also reduce rates”.

Using slightly stronger wording was Market Economics managing director Stephen Koukoulas who said that the RBA can’t just sit on their hands and should act at the next board meeting on February 3rd,

"I wouldn't say it's urgent but if they don't cut in February I don't know what's going on with them," he said.

"It's just absurd and the RBA can't let it stand."

Also pressuring the Australian dollar yesterday was news that the European central bank plans to spend more during their stimulus program to kick-start the economy than originally planned. Analysts now expect a figure of €50 billion a month until December 2016 to help the Eurozone fend off deflation.

 

[FIBOgroup]

26.01.2015 - Australian dollar readies for rate cut

On Monday the Australian dollar fell to a new 5½ year low as worries over the quantitative easing program in Europe and the Greek election results, where the Anti austerity party Syriza won by an overwhelming majority with a promise to renegotiate Greece's debts.

At (AEDT) the Aussie dollar was trading at US79.09c after falling as low as US78.56c in early trade.

With 97% of the votes counted, the leftist party Syriza was set to have 149 seats in parliament, one short of the 151 it needs to rule outright but will have no trouble finding a smaller party who agrees with their principles,

A the top of the party's agenda, and creating uncertainty in the financial markets, is the planned restructuring of the credit given to Greece by the "troika" to bail them out of the 2008 financial crisis in return for sharp Austerity measures.

The “troika” consisting of the European Central Bank, the European Commission and the International Monetary Fund have lent Greece money to keep it afloat in recent years.
With last week's decision by the Bank of Canada to lower interest rates and the European Central Banks planned quantitve easing program analysts now believe that the RBA will have to start some sort of their own monetary program by lowering interest rates.

"What we're seeing is a lot of central banks are making surprise decisions at the moment ,Canada, India, Denmark. So in this environment of central banks pushing rates down and adopting easing strategies it becomes a lot more respectable to do that," noted Westpac chief economist Bill Evans.

"After the Bank of Canada, an RBA move downward "wouldn't surprise the market as much", Mr Evans said.

The rates market is now factoring in a 40% chance of a rate cut at the RBA's next meeting in February.

The Key to the RBA's move on interest rates will be the release of the latest CPI figures from Australia due out later this week where the Central bank will be hoping the number meets their target Inflation range of between 2% and 3%.

Anything less may see them making a move on rates in February as a growing number of analysts are starting to predict.

 

[FIBOgroup]

27.01.2015 - Australian dollar sits tight ahead of key data

The Australian dollar is sitting tight today gearing up for a round of important news due out this week.

At 6.28pm (AEDT) the Aussie dollar was trading at US79.22¢ virtually unchanged from yesterday.

The first round of news to hit the market is the durable goods number today from the US where analysts expect a number of 0,5% in stark contrast to last month's reading of -0.9% which may see the Australian currency drop back below the US79.00¢ mark.

The highlight of the week will be the latest CPI numbers from Australia where the consensus is for a number of 1.8% well down on last month's 2.3% and under the RBA's inflation target of between 2-3%.

"The news may be make or break for the RBA concerning interest rates" noted analysts at Fibogroup forex brokers.

"If the number comes in under expectations and especially by a big margin we could see the Central Bank move on rates as early as February to lift inflation back towards the target rate.

The falling CPI numbers have come about on the back of lower oil and food prices as well as sluggish wage growth. Most analysts agree that a weak inflation number is needed this time round in order to spur the RBA into action to move on rates.

Later on Wednesday the US Federal reserve will release their latest interest rate decision as well as the following monetary policy statement where the focus will be on the timing of an interest rate rise.

Even though Inflation in the US is under the Fed's target, a number of other indicators are moving ahead like the unemployment rate and consumer spending.

This should be enough to keep the Central bank on course to lift interest rates at sometime in the nearest future with some noting that April may be a possibility.

 

[FIBOgroup]

28.01.2015 - Australian dollar higher awaiting US Fed rate decision

The Australian dollar broke through the US80¢ mark today after the latest CPI figures came in only slightly under what most analysts had expected.

The local currency is now trading at US79.70¢ after reaching a high of US80.23¢ directly after the announcement.

The Australian Bureau of Statistics reported on Wednesday the consumer price index rose by 2% in the December quarter bringing the total inflation to 1.7% for the year. The number was just short of analysts’ expectations of a 1.8% rise but is a sharp fall from the 0.5% and 2.3% in the September quarter.

Western Union Business Solutions currency strategist Steven Dooley said the number surprised the market given the recent run of poor inflation numbers from other countries,
“It was a huge shock to markets, especially when there’s been so much conjecture about whether the Reserve Bank would cut rates at its February meeting,” he said.

“Markets have taken this as a clear sign that this is off the table, underlying inflation remains firmly in the lower end of the RBA’s target band and on the back of that strong jobs number we had earlier in the month it certainly seems that there is no desperate imperative for the RBA to cut rates.”

The focus will now be on the latest interest rate decision from the US Federal Reserve due out later today where the central bank is expected to take a tough stance and move ahead with their planned interest rate rise later in the year.

“The statement from the Fed may determine whether the Aussie dollar breaks back above the US80¢ mark or falls back below the US79¢ mark” noted analysts from Fibogroup forex brokers.

“The consensus is that they will take a hawkish stance and indicate a potential interest rate rise so we may see the Australian dollar give up the gains from today”.

 

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29.01.2015 - Australian dollar slumps as RBA set to cut rates

The Australian dollar is back below the US80¢ mark today after yesterday's statement by the US Federal Reserve and reports that the Reserve bank of Australia is considering an Interest rate cut.

An article by renowned Business reporter Terry Mccrann noted that it was almost certain that the RBA would cut interest rates after their next board meeting on Tuesday,

"A lot of things have changed since the RBA’s last meeting and rate statement in December. They are all are rate-cut positive, so to speak" Mccrann wrote

"The two big negatives are the Swiss move to delink the franc and the, true, not exactly unexpected, moved to QE by the ECB. But expected or not, the outcome is to further flood global markets with liquidity and depreciate the euro".

In regards to the recent declines in the oil price and the effect on the economy he noted,

"The big plus is of course the fall in the oil price — although the reaction has mostly been gloomy. In the longer run a lower oil price would argue against rate cuts, as it would tend to boost growth. But in the short run it works the other way, as it is yet another — and big — deflationary driver".

"The combination of central bank money printing and yet spreading deflation would by itself make it hard for the RBA to continue to stand alone in the world with its “high” 2.5 per cent official rate while (almost) everyone else is zero-plus money printing"

In another blow to the Aussie dollar yesterday the US Federal Reserve said the economy was expanding rapidly which most analysts took as a sign that they are on track to raise rates in the nearest future which will narrow the gap between the two countries.

Rates in Australia currently stand at 2.5% while in the US the rate sits at 0.25%.

Although they mentioned the word "patient" in the timing of an interest rate rise they noted the recent strength of the employment market and that it would only be a matter of time before the weakness in inflation caused by a slump in the energy sector would subside.

 

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30.01.2015 - Australian dollar in dramatic free fall

The Australian dollar tumbled overnight hitting a fresh 5.5 year low weighed down by falling commodity prices and expectations that the Reserve Bank Of Australia is bound to cut interest rates next week or in March the latest.

At 4.46pm (AEDT) the local currency was trading US77.91c after reaching a low of US77.18c in yesterday's trade.

Three of the four major banks in Australia now agree that the RBA will cut rates soon although they predict that the first move will come in March.

Looking forward, Commonwealth Bank's chief currency strategist Richard Grace noted that the Futures market is a sign of the sediment surrounding the Australian dollar at the moment,

"If you look at the 30-day futures, which is a good measure of where interest rate expectations are, from a current cash rate of 2.5 per cent they've got interest rates priced down to 1.9 per cent by March 2016," he said.

On the timing of the first interest rate cut for the year by the RBA he also noted,

"The speculation around next week's cut still remains around that 50 per cent probability, with 2.35 per cent priced in, but you've got almost a full rate cut priced in for March, so if they don't move next month the speculation is they'll move in March."

Also pressuring the Aussie dollar yesterday was the slump in iron ore prices hitting a new 5 year low in yesterday's trade.

The price of Australia's biggest export fell to $US62.70 a tonne, down 0.2% from the previous day, reaching levels not seen since 2009.

According to Piet-Hein Ingen Housz, global head of metals at ABN Amro Bank NV, investors shouldn't hold their breath for a recovery in the iron ore price any time soon as big companies ramp up production at a time when the market is already flooded, to grab a bigger piece of the market,

“My crystal ball says iron ore will remain low. Demand in winter is usually lower than the rest of the year as steel mills cut output before the Lunar New Year, while the so-called big four miners are producing more than ever to gain market share and weed out smaller producers" he said.

 

[FIBOgroup]

02.02.2015 - Property bubble may save Australian dollar

The Australian dollar is hovering below the US78.00¢ mark today as the market awaits tomorrows key interest rate decision by the Reserve Bank of Australia with more and more analysts now predicting a rate cut.

At 6.50pm (AEDT) the Australian dollar was trading at US77.87¢ up from US77.57¢ at close of trade on Friday.

With inflation now running below the RBA's preferred target of between 2-3% and set to fall further throughout 2015 the central bank may be readying to cut 0.25 basis points from the current rate of 2.5%.

Also of a concern, and another catalyst for a rate rise is the unemployment rate which remains stubbornly high with analysts predicting the number to move higher later in the year.

Financial markets are now pricing in around a 60% chance of a rate cut tomorrow and a 100% chance of a rate cut as the year unfolds.

There are some however, going against the trend like CommSec chief economist Craig James who says the continuing growth in real estate prices and potential inflationary fears may see the RBA leave rates on hold out of fears of adding more pressure to the already sky high property values.

Prices, especially in Sydney and Melbourne continue to rise sharply growing 1.4% and 2.7% respectively last month, putting more pressure on homebuyers and pricing more people out of the market.

“The latest economic data have shifted the balance of risks in favor of rates being left on hold,” James said.

“While global deflationary forces support the case for an easing of domestic monetary conditions, the risk is that another rate cut will lead to unsustainable strength in domestic home prices and contribute to inflationary risks".

“The strength of the housing market will clearly feature at the Reserve Bank board meeting.”

 

[FIBOgroup]

03.02.2015 - Rate cut hits Australian dollar, to send property prices sky high

The Reserve Bank of Australia cut interest rates today potentially adding fire to an already overheated property market.

At 9pm (AEDT) the local currency was trading US76.57¢, tumbling from US80.00¢ in yesterday's trade.

The RBA, in a move that caught some of guard slashed the benchmark interest rate by 25 basis points to 2.25% in order to tackle the stubbornly high dollar and boost inflation.

Speaking after the release of the decision Governor Glen Stevens noted that commodity prices have continued to fall which will eventually lead to inflationary worries,

"Commodity prices have continued to decline, in some cases sharply. The price of oil in particular has fallen significantly over the past few months. These trends appear to reflect a combination of lower growth in demand and, more importantly, significant increases in supply. The much lower levels of energy prices will act to strengthen global output and temporarily to lower CPI inflation rates".

Regarding the Australian dollar, the governor noted the currency was high by historical standards which lead some analysts to believe that he would like to see the currency fall further even after today's dramatic slide,

"The Australian dollar has declined noticeably against a rising US dollar over recent months, though less so against a basket of currencies. It remains above most estimates of its fundamental value, particularly given the significant declines in key commodity prices. A lower exchange rate is likely to be needed to achieve balanced growth in the economy".

Today's move by the RBA on rates threatens to add fuel to the fire of an already overheated property market as people sign up for cheaper mortgages and jump on the property ladder.

Richard Wakelin, director of Wakelin Property Advisory noted that the cut in interest rates will definitely bring more buyers into the market with a large part of them being investors, who the RBA blamed earlier for pushing real estate prices up,

“A cut in borrowing costs will inevitably feed into stronger demand for property, which in turn will push prices up,” he said.

“Investors are likely to be among the groups most responsive to a rate cut.”

“It means their gross funding gap will be less than 1 per cent, an incredible low for investment grade property,”

 

[FIBOgroup]

04.02.2015 - Australian dollar fights back

The Australian dollar has bounced sharply of a 6 year low after yesterdays surprise interest rate cut from the reserve bank of Australia.

At 10.19pm (AEDT) the local currency was trading US78.06c jumping from yesterday's low of US76.24

In a stunning reversal the Aussie dollar shot back up through the US 78.00c mark after news that Greece had come to an agreement with its creditors on restructuring its debts, and another bounce in the oil price which has gained over 20% in the past week.

The Greek government, in a sign that they are looking for a compromise, offered a deal to creditors that would see them swapping their debt for new growth-linked bonds.

"The market is beginning to see signs of some stability coming into oil and the Greek situation seems to be tilting towards the side of what the market is looking for, which is a retreat from its call for a debt write-down," said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey.

Citing falling commodity prices analysts at Goldman Sachs predict that the Australian dollar's rise will be short lived and it will fall to US72.00c this year down from an earlier forecast of US75.00c.The also believe that the RBA will cut interest rates again in May following on from their rate cut yesterday.

The speed with which commodity prices have slumped caught everybody off guard with a negative impact for the Australian economy the Investment bank noted,

“The commodity prices that matter for Australia have fallen faster than even our own bearish expectations. This dramatic change to the commodity complex has material and wide-ranging implications for the Australian economy and policy makers.”

Key news due out later in the week includes the latest monetary speech from the Reserve Bank of Australia as well as unemployment figures from the US which may signal a robust jobs market and keep the US Federal Reserve on track to lift interest rates in the nearest future.

 

[FIBOgroup]

05.02.2015 - Australian dollar up on Chinese stimulus

The Australian dollar is trading higher today after a move by the Chinese central bank to further stimulate the economy in the wake of a potential slowdown.

At 9.43pm (AEDT) the Australian dollar was trading at 78.13c up from 77.50c in yesterday’s trade.

In a sudden move late yesterday, the People's Bank of China reduced the reserve requirement ratio that banks are required to hold by 50 basis points to 19.5 per cent in order to kick start lending and breathe some life into the economy.

“The Chinese government is finally coming to terms that the economy is starting to pullback,” noted analysts at Fibogroup forex brokers.

“First it was a cut in Interest rates by the Chinese central bank and now a reduction in the reserve requirement which shows that the government in China is willing to do whatever it takes to boost the economy and they are not just going to sit and wait.” They noted.

Not everybody believes that the Aussie dollar’s future looks bleak including New Jersey-based fund manager Jeffrey Sica, whose firm Circle Squared Alternative Investments manages around $1 billion in funds

He is betting that the Aussie dollar will be one of the better performing major currencies looking ahead by noting that the Australian economy is financially sound and not about to embark on some stimulus plan like most of the other major economies have done or are about to commence,

“As a currency trader you always bet against the country that’s most desperate in its attempts to stimulate its economy. In Europe, I see this desperation, but I can’t see this in Australia,” Mr Sica said

 

[FIBOgroup]

06.02.2015 - Australian dollar under pressure on US job figures

The Australian dollar came under pressure during the American session on Friday as the latest Non-Farm payrolls figure hit the market well above expectations.

At 3.22am (AEDT) the local currency was trading at US78.08c after falling as low as US77.77c directly after the announcement.

The Non-Farm payrolls number from the US came in at 257,000 well above expectations of 234,000 while average hourly earnings for the month of January rose 0.5% against a consensus of 0.2% bringing the yearly average wage increase to 2.2%.

This is the 12th consecutive month where the number of new jobs created has remained above the 200,000 level confirming comments made by US Federal Reserve boss Janet Yellen in her monetary speech last week that the labour market is powering ahead.

“This news is definitely going to boost the case for an Interest rate rise,” noted analysts from Fibogroup forex brokers.

“The unexpected growth in wages, which has been the least performing number in an otherwise robust jobs market, is certainly going to help the Feds cause”.

The Australian dollar is likely to remain under pressure as we head towards Monday when the Head of the Reserve Bank of Australia Glenn Stevens gives his latest monetary speech, where he is expected to further talk down the Aussie dollar in the hope that it will reach the central bank’s target of US75.00c in the nearest future.

 

[FIBOgroup]

09.02.2015 - Australian dollar down on Chinese data, political uncertainty

The Australian dollar retreated Monday as political uncertainty loomed and trade figures from China hit the market well under expectations confirming fears of a slowdown in the world's second largest economy.

AT 7.35pm (AEDT) the Australian dollar was trading at US77.82c down US77.97c at Friday's close.

Chinese exports for the month of January fell 3,3% from the previous year against expectations of a 6.3% increase while imports fell a whopping 19.9%, coming in well below analysts' expectations of a -3.3% drop.

Julia Wang, Greater China Economist at HSBC, noted that the figures showed a slump in demand from both the internal and external markets and that the government should act to address the problem,

“The foundation for an exports-led recovery looks unsteady at least for now,” she said. “That will put more pressures on domestic demand to drive growth this year. We believe policymakers should deploy more aggressive monetary and fiscal easing in the coming months.”

Also rattling the Aussie dollar today was the threat of Australia plunging into political uncertainty as Prime minister Tony Abbott squared off against colleagues in a leadership challenge that threatened to remove him from office,

Lawmakers in the party voted 61 to 39 against a “spill motion,” which would have removed the prime minister and his deputy leader leaving the positions open to be filled by a vote from party members.

After the vote and looking visibly shaken, Mr. Abbott said,

“The Liberal Party has dealt with the spill motion, and now this matter is behind us.”

Acknowledging that mistakes had been made in the past, Abbott vowed to put the people first and not repeat the mistakes of the two previous governments,

“We are absolutely determined to work for you, the people who elected us,” he added. “We want to end the disunity and the uncertainty which destroyed two Labor governments, and give you the good government that you deserve.”

 

[FIBOgroup]

10.02.2015 - Australian dollar drops on deflationary fears from China

The Australian dollar has dived below the US88.00c mark after another round of disappointing data out of China sparked fears of a slowdown in the world's second largest economy.

At 11.08pm (AEDT) the Aussie dollar was trading at US77.68c down from US77.99c in yesterday's trading.

Following on from the disastrous trade figures released late Sunday, China’s consumer price index, a barometer of inflation tumbled to 0.8% in the 12 months to January, falling to its lowest level since November 2009.

The producer price index fell to -4.3% over the last 12months against analysts expectations of a -3.8% decline, dragged down by falling energy and commodity prices.

ANZ Bank's chief Greater China economist Liu Li-Gang noted that the latest numbers are very disturbing and deflation has become a “real risk” for China.

“PPI inflation suggested that the out-of-factory prices remained extraordinarily soft due to sluggish demand for manufactured goods,” he said.

Mr Liu also said that further monetary policy would help and the Chinese government seem willing to act,
“Indeed, China’s central bank cut the reserve requirement ratio (RRR) last week and conducted a large amount of reverse repos before the Chinese New Year, indicating that the central bank has engaged into aggressive easing to head off the deflation risk," he said.

Mr Liu predicts China’s central bank will lower interest rates as we head in to the first half of the year.

The continuing disappointing news out of China is only going to see the Australian dollar dive lower as the price of iron ore, Australia's biggest export comes under further pressure as the Chinese cut orders.

 

[FIBOgroup]

11.02.2015 - Australian dollar brushes off strong lending figures

The Australian dollar has drifted lower today, brushing off the positive home loans figure that came in well above analysts’ expectations.

At 12.23am (AEDT) the Aussie dollar was trading at US77.40c down from US77.69c yesterday.

The Australian Bureau of Statistics reported that home loans in Australia rose by a seasonally adjusted 2.7 %, beating forecasts of a 2% increase and well up on the 0.7% decline in November.

Investor loans jumped 6% from November well above last month’s figure of -2.2% adding fuel to the fire of an already overheated housing market, with some predicting, such as Michael Workman, a senior economist from the Commonwealth Bank of Australia, that the government may have to intervene to cool things down,

“Today’s lending data may prompt additional controls over lending to investors in coming months,” he said.

Another reason behind the jump in figures is that investors may be trying to get in and take out new loans now before new legislation is introduced, according to Stephen Walters, chief economist at J.P. Morgan, Australia

“One possible driver of this upturn is the fear of looming macro prudential tightening, which may draw in a pool of marginal buyers wanting to get in before investor credit conditions get tighter,” Mr. Walters said.

The Aussie dollar may sit tight as the market awaits the release of key employment data tomorrow out of Australia.

The consensus is for an unemployment rate of 6.2%, up on last month’s figure of 6.1% with anything more likely to see the Aussie dollar break down through the US77.00c mark as fears grow of a jobs crisis developing in the local economy.

 

[FIBOgroup]

12.02.2015 - Australian dollar closes in on new six-year low

The Australian dollar took a hit yesterday after disappointing unemployment data hit the market raising the prospects of a second consecutive rate cut in March.

At 7.21pm (AEDT) the Australian dollar was trading at US77.57c down from US77.17c in yesterday’s trading.

The unemployment rate jumped to 6.4% in January from 6.1% in December according to the bureau of statistics against analyst’s forecasts for a number of 6.2%.
The number of job losses reached 12,200 against an expected decline of 5,000, with most of the cuts coming from fulltime employment, which is a worrying sign.

A JP Morgan economist, Tom Kennedy summed up the situation by noting it was a “shocking report all round”.

“There was not a lot of good news in this report,”

“At this stage the data has been quite mixed, we had some pretty strong housing numbers, but then we get this January jobless number, so it is a very fine balancing act,” he said.

“At this stage we think May is more likely than March, but March is going to be a live [RBA] meeting in terms of market pricing and expectations,” he said.

The number of analysts now predicting a rate cut from the RBA in March has grown to 68% up from 43% before the release of the unemployment data.

The Aussie dollar may come under further pressure as the market awaits the latest monetary speech from RBA governor Glen Stevens that is due out later in the evening.

One of the main reasons why the Australian central bank cut rates last week was concern over the rising unemployment rate so it will be interesting to see if Governor Stevens takes note of yesterday’s news and talks down the Aussie dollar even further.