httpvh://www.youtube.com/watch?v=GKTl2wLXPpU
AUD puts on weight across the majors.
• Aussie dollar stays in vogue as US data continues its fits and starts.
• Debt trifecta in Portugal.
• Data and M&A activity is positive for risk.
The AUD has had a stellar run this week as a new high was found against the Greeenback and robust gains were extended against the GBP & EUR. The data out this week came to resemble the fits and starts of the US recovery story, however treasuries have fallen for nine days straight highlighting the conviction in the market regarding US growth prospects. The Treasuries weakened as GDP (3.1%), Personal Consumption Expenditure (.7%) and Pending Home Sales (2.1%) performed better than expected. The malaise in key data however, highlights a medium term US recovery with the House Price Index (-3.1%) and Continuing Jobless Claims figures (3.7m) still the lead balloons attached to economic optimism.
The Eurozone sovereign debt crisis has escalated further this week as yields continue to increase. Portugal’s Prime Minister, Jose Socrates resigned last week after the failure of his austerity measures being passed through Parliament. With 9 billion euros due in April and June the ability to meet both redemptions is called into question amidst an uncertain political environment. Furthermore the 2013 European Stability Mechanism, there to rescue countries from default, may have refinancing constraints attached that leaves current bondholders exposed. Ratings agency Standard & Poors completed the debt trifecta by downgrading Portugal’s risk rating to the lowest investment grade level along with Greece to three below investment grade. Adding further policy challenges for the region, the ECB President has signalled that there will be an interest rate hike above the current 1%, as early as next week.
There’s been a strong rally in stocks this week with risk appetite buoyed by economic data and M&A activity. In the US the S&P500 put on 1.98% due to positive economic data and higher commodity prices while our own ASX200 rose 3.6% over the last week. The local market moves were off the back of BHP announcing a 12B capital expenditure package to expand its iron ore and coal operations, while Biopharmceutical company ChemGenex became a takeover target of Valeant Pharmaceuticals. This increase in risk appetite and lack of volatility is increasing demand for the higher yielding Aussie peaking today (Wednesday) at 1.0331.
Visit our homepage for more information on how we can help you with your foreign exchange requirements.