Aussie Finally Rebounds

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Market Drivers for June 12, 2013
Aussie takes out 9500 on better Westpack numbers
UK labor data improves
Nikkei -.21% Europe .14%
Oil $95.50/bbl
Gold $1376/oz.

Europe and Asia:
AUD Westpac Consumer Confidence 4.7 vs. -7.0
GBP Claimant Count -8.6K vs. -6.8K
GBP Average Weekly Earnings 1.3% vs. 0.3%
GBP ILO Unemployment Rate 7.8% vs. 7.8%

North America:
USD Monthly Budget Statement 14:00

The Australian dollar finally came back to life, rising above the 9500 barrier in morning European trade after better than expected consumer sentiment data suggested that spending may pick up over the next few months. The Westpac survey saw a rise to 4.7 from -7.0 the month prior as attitudes towards car and real estate purchases improved markedly.

The news lifted the spirits of the beleaguered Aussie longs and the unit enjoyed its first serious bounce after setting yet another yearly low in yesterday’s Asian session trade. We have been noting for several days that the Australian dollar has been grossly oversold and that a dip under the 9500 level was likely to bring out bids from longer term investors.

Today’s positive Westpac numbers provided the fuel for the short covering rally with yesterday’s lows near the 9300 figure likely to be the near term bottom for the pair.The Aussie also got a boost from liquidation in EUR/AUD cross which dropped through the key 1.4000 level after setting spike highs above 1.4200 in yesterday’s trade.

Elsewhere, the UK labor data suprised to the upside with claimant count decreasing to -8.6K versus -6.8K while the average weekly earning rose 1.3% versus 0.3% eyed. This was the biggest rise in income since February and taken against declining inflation rates it should provide UK consumers with more purchasing power over the summer months.

The UK data has been consistently better than consensus suggesting that growth in Q2 is likely to see substantial improvement. This has translated into much better performance for the pound which is now within striking distance of the 1.5700 level.

With no US economic releases on the docket traders will have no macro data to analyse, but the recent dollar weakness may take a pause as high beta currencies approach key levels. The EUR/USD for example has found plenty of seller at the 1.3340 zone and is now trading at 1.3275 in late morning European dealing. With no meaningful news on the calendar the currency market looks like it wants to correct some of the excess moves of the past several days.

Boris Schlossberg
Managing Director

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