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• AUD posts stellar gains.
• Local data on the front foot.
• Debt markets provide endorsement of the global recovery.

The Australian dollar has posted stellar gains over the last week as US equity markets rallied to the tune of the US earnings season. It’s early days in the corporate reporting calendar however the results to date have been positive despite the initial climate of trader trepidation regarding US corporates and their ability to turn earnings around. This has meant it’s not just Australian tourists being hit by rampaging bulls this week, the S&P500 has been knocked higher by 6.4% and the resulting demand for risk has seen the Aussie post gains reminiscent of 2009. Of particular note was Alcoa’s earning’s up significantly to 13 cents per share and chipmaker Intel, increasing sales to $11.6B, both well above analyst expectations. To round out the local currencies’ supporters, commodity prices have gained over the last week with both oil and metal prices performing well.

On the data front, local data has been particularly firm this week with Unemployment at 5.1% with 45.9K jobs added. This was accompanied by Home Loans growing 1.9% and Westpac Consumer Confidence up 11.1%. A silver lining could be found in the US this week as Initial and Continuing Jobless Claims figures dropped. Prominent economist Paul Krugman has argued that there should be a significantly greater amount of fiscal stimulus provided in the US to avoid a reticent economy similar to Japan’s ‘lost decade’ in the 1990’s. In China, the government announced that it would look to further constrain the overweight panda that is their housing market.

In Europe, sovereign debt has performed well over the last week, with global optimism rising as debt yields fell. In particular, Greek yields have fallen below the levels that it could receive via European aid and China purchased a significant amount of European debt. This week has seen a widespread endorsement of the global economy by debt markets, with credit-default swaps falling in Asia and junk bond spreads narrowing in the US. Furthermore ECB President Jean-Claude Trichet stated that the need for the ECB and IMF to intervene in debt markets was “diminishing”.