Calm and a sense of optimism have slowly crept into the market over the past few days and this has seen trading in AUD/USD flat. The pair has hovered around 0.9700 for the past 48 hours or so reaching a high of just over 0.9800 yesterday. The Aussie dollar exchange rate as a whole has benefited from this renewed optimism and is up around 0.3% against most the crosses today.
U.S markets rallied overnight, up around half a percent with the Nasdaq finishing almost 0.7% higher. The rally in equities was due in part to a strong ISM non-manufacturing reading which beat estimates coming in at 53.7 (estimates were centred around 53.6). The ISM non-manufacturing reading is important because it is essentially a reading of the health of the services sector and services are seen generally as the backbone of any recovery. News out of Europe was mixed but suggested the banking crisis in Spain is not as bad as perceived by the media with reports from government ministers and banking executives suggesting Spain does not need a bailout, having said that, they have numerous times mentioned that about 40 billion Euro’s would be sufficient capital to recaptilize their banks…I’m confused and I think the Spain is too.
European markets were mixed on the conflicting news coming from Spain, Germany and the rest of the continent with the FTSE down but the Stoxx top 50 European stocks rallying almost half a percent. Markets seem to be keen on the idea that Europe will create a fund which pools the Eurozone’s debts. The EUR/USD exchange rate is trading just below 1.2500 and down again today after having rallied for three consecutive days last week.
Today in Australia sees the release of GDP numbers at 11:30am, expectations are for around 0.5%, slightly above the final quarter of 2011. Any wide deviation from expectations could see Aussie exchange rates trade with increased volatility. In Europe tonight Mario Draghi, head of the ECB will meet with board members to discuss interest rate’s in the Eurozone, expectations are for no change in the bid rate, however, the market will be looking for an indication on further stimulus or action on the European debt crisis.