AUD Weakens as Mayan Apocalypse Approaches

Brief Summary:

• The AUD has lost ground against the majors this week. AUDUSD has lost some ground from its high of 1.0585 to be 1.0517 at time of writing. AUDEUR lost ground over the week to be 0.7937 at time of writing. The EUR strengthened as S&P raised Greece’s debt rating from selective default to B-; an improvement of sorts. AUDGBP fell below 0.6500 to 0.6466 at time of writing; the lowest level since early December.
• The HSBC Flash Manufacturing Purchasing Managers’ Index was released last Friday at 50.9, improving from 50.5 last month. The survey measures manufacturing business conditions in China and indicated expansion above 50.0. The figure had been below 50.0 since October 2011, the last two months improved figures indicate Chinese growth has stabilised. A good figure tends to support the AUD as Chinese manufacturers drive demand for Australian exports. The figure lent the AUD support going into the weekend.
• The Reserve Bank of Australia (RBA) released the minutes from its December interest rate cut. The statement had the expected neutral tone, albeit with a slightly rosier outlook for the global economy. The board describe their decision to cut as made “on balance” and moved away from the easing bias concluding statement used through most of 2012. The AUD didn’t react to the minutes indicating nothing new was said.
• The fiscal cliff negotiations seem to be progress with Republican accepting that taxes will rise on wealthy Americans; the question that remains is – how wealthy? Obama’s original proposal set the threshold on tax increases at incomes above $250,000; this has now risen to $400,000. John Boehner’s counter offer set the threshold at $1,000,000, a proposal that was immediately rejected by Democrats. Obama has licence to stand strong, tax hikes on the wealthy was a cornerstone of his election winning pitch and opinion polls continue to exemplify this.

How will the AUD finish off the year?

• To conclude the weekly updates for 2012, we will look back at AUDUSD’s performance in December since 2000.
• The Santa Claus Rally is a well documented stock market phenomenon where stocks tend to rally between Christmas and New Year’s Day. Given the AUD generally moves with risk assets like shares, we can expect it be subject to this trend.
• The AUD has posted monthly losses against the USD only four times in the past twelve years. Furthermore, despite what happened earlier in the month, the AUD has perked up in the final few trading days almost every year.
• The final segment of 2012 seems fraught with danger. The Mayan apocalypse on the 21st and the fiscal cliff beginning on 1st day of 2013 could lead the AUD to post anomalous losses.

• From everyone at World First, have a Merry Christmas and a Happy New Year.