Aussie falls from its halcyon highs.
• Australian data undermines currency strength.
• Equity markets tentative amidst debt restructuring.
• QLD floods.
The Australian data has been hit hard over the last week and a half, sliding 4% from $1.02 to $.98 against the Greenback, as economic conditions have fallen short of expectations. The Australian data has looked unappealing to investors with HIA Home Sales (-.2%), Building Permits (-9.9%) and Investment Lending all softening. The Trade Balance (1.92B) was the most important piece of data out and the trade surplus contracted heavily in November, resulting in the AUD free-falling a cent on Tuesday. The halcyon days for the currency of parity and above have been placed on hold, providing much needed relief to exporters.
Overseas equity markets have been moving around like an economic piñata this week as poor economic data, European debt restructuring and company earnings have often offset one another. Of particular focus has been the restructuring of 1.25billion Euros by Portugal, which if at yields above 7% will likely require a bailout. The economic data has been weak in the UK and the US, with the much anticipated US Nonfarm Payrolls (103K) figure well short of the expected 135K added to the workforce. Risk appetite however, has been provided by US companies reporting better than expected earnings resulting in a net gain to the S&P 500 of +.34%. US banks announced reduced holdings of US treasuries, reflecting not only the recent quantitative easing strategy by the Fed, but also a search for higher yields by the banks amidst growing confidence in the US recovery in 2011.
The flooding in QLD has had tragic consequences this week. The widespread inundation of communities has also seen revised expectations of the RBA lifting the cash rate this year, with speculation as much as 1% will be removed from economic growth. Infrastructure linked to commodity exports, including ports and railways, have been damaged or closed and as a result the local currency has been under pressure. Floodwaters look to remain at their peak until Saturday at the earliest.
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