• AUD remains stagnant as global sentiment becomes a key issue.
• Global sentiment on Europe’s terms.
• Moody’s warns the US & UK on debt and US Health Care Bill boosts risk appetite.

The Australian Dollar has remained relatively unchanged against the Greenback over the last week amidst a vacuum of local economic data and tentative market sentiment surrounding the global economy. Traders have played a wait and see approach towards the local currency despite strong showings in overseas equity markets with the S&P500, a key indicator of risk appetite, up more than 2.00% from this time last week. Local economic data will play less of a role leading into next month’s RBA decision as the Reserve Bank has indicated that there is less pressure to curb economic growth. Excess capacity concerns however, may force their hand if global demand spikes.
Globally, market sentiment has been skewed over the last week with greater uncertainty over who should sure-up the Greek debt crisis. It is now more likely to be an IMF led solution with German Chancellor Angela Merkel pouring cold water on their role in the solution saying that the International Monetary Fund “would probably have to be the way out right now if action were to be taken”.
Recent shakes in the economies in the Eurozone and the UK have resulted in strong performances from the Aussie against the Euro and GBP which unlike the USD, don’t have the appeal as safe haven currencies. In the Asia Pacific, China tightened the credit available to property speculators and India surprisingly increased interest rates, both announcements that were detrimental for the Aussie dollar.
Ratings agency Moody’s looked to bring US and UK Fiscal deficits into perspective by announcing that both countries had moved “substantially” closer to having their AAA credit rating downgraded. This week we saw the US Health care bill passed which was positive for currencies tied to risk sentiment with overseas equity markets responding positively to the outcome.