Daily Market Commentary - 16th May 2012
Daily commentary
The Australian dollar opened Wednesday at its worst levels in 5-months against its U.S. namesake and Japanese yen, hounded by the crescendoing noise circling the European debt crisis and yesterday’s dovish Reserve Bank of Australia meeting minutes. The RBA slashed its key lending rate by 50-basis points earlier this month to 3.75%, confounding market soothsayers who were looking for a mere 25-basis point cut. The document explained, “Conditions faced by many firms not exposed to the mining sector remained weak, with the high level of the exchange rate continuing to weigh on import-competing and exporting firms.” This coupled with low readings in key measures of inflation afforded the central bank an opportunity to aggressively inject monetary stimulus into the Australian economy.
The Eurozone’s single currency was Tuesday’s worst performer, and lost value against all of its industrialized counterparts. Pessimism continued to run rampant across the financial plains after Greece’s inability to form a desperately needed replacement government. The peripheral Eurozone state will therefore have to hold national elections, though this could increase the possibility of implementing a secessionist leadership. The single currency staged a temporary rally early yesterday after German and Eurozone GDP exceeded the market’s forecasts, but these gains quickly turned to significant losses after the Greece’s political gridlock hit the newswires.
Top economic reports on the roster today include those on Japanese machine orders, Australian consumer confidence, Eurozone inflation, and American housing starts. Investors should be particularly wary of the statements in the Bank of England’s quarterly inflation report expected this evening.
Key Releases
| Indicator | Actual | Forecast | Previous |
|---|
| AU RBA Monetary Policy Report (May) | - | ||
| JP Consumer Confidence Index (Apr) | 40.0 | 40.8 | 40.3 |
| DE Q1 GDP | 0.5% | 0.1% | -0.2% |
| EU Q1 GDP | 0.0% | -0.2% | -0.3% |
| GB Trade Balance (Mar) | £-8.564B | £-8.400B | £-8.590B |
| US CPI (Apr) | 2.3% | 2.3% | 2.7% |
| US Retail Sales (Apr) | 0.1% | 0.2% | 0.7% |
