Australian Dollar Soars on Excellent Economic Data

Tuesday, 26 October 2010

The Australian Dollar has been the best performer so far this week, and we believe that it is in for a continuation of the ride that it has had. The currency was boosted by the G-20 talks (which we didn't think were going to have much impact at all to be honest) and has been further boosted today by data which was released in the Australian session.

This data was the PPI index, which consists of a basket of Producer Prices and the levels at which they are now priced compared to the last period. The reading showed that the figure topped expectations, coming in at 1.3% for the third quarter. This reflected positively for the AUD, with the AUD/USD rising once again in trade.

The expectation of the data was at 0.5% - so you can clearly see just how well the economy is performing in terms of Producer Prices (and thus the amount of dollars which change hands in the currency markets as a result).

On more fundamental fronts, the Japanese Yen was also a currency of interest. The Japanese released their Merchandise Trade Balance yesterday - which showed that the surplus for the country widened to 797 billion yen in September.

This is clearly an improvement, and could possibly be a motivation for the Japanese central bank to hold off on intervention for the moment.

Coming up in the sessions ahead, we have a select range of Eurozone news and data released on the calendar. First up is the Eurozone Industrial New Orders - which will give us an outlook on a Year on Year and Month on Month basis of the industrial strength of the Eurozone. We expect the YoY figure to print at 19.3% - which is up on the previous period of 11.7%.

Additionally, we believe that MoM figures will print at 2.2% - which will again be up on the -1.8% reading in the previous period. Both of these released are of moderate importance to the market, however we doubt that the reading this time around will cause much of a movement in the EUR. There are too many other things happening in the currency markets at present for a medium influence factor to have much tangible effect.

In the upcoming American session, Chairman Ben Bernanke will speak in the US, and the President of the NY Fed will also give a speech on economic strength in America. We will be watching these speeches closely for any information on quantitative easing policy or changes which could take place in the near term.