12 May 2015
Australian budget next focus
FXStreet (Bali) - A slow Asian session, with G10 currencies confined in familiar levels, after what also was a rather passive Monday, as market remain expectant of further Greek funding news.
The Australian Dollar managed to catch a firmer bullish tone, moving over 35/40 pips from is day lows just under 0.79 to print its highest at 0.7923 ahead of the Australia's budget announcement at 9.30 GMT, in which a deficit of AUD 40-41 bln is expected.
Treasurer Hockey said, via Bloomberg, that the budget is set to beat market deficit forecast of AUD 40-41 bln, adding that the country is on trajectory back to budget surplus, while adding that the budget will focus on strengthening the economy.
The Aussie was also boosted by news that Australia's AAA rating is not at risk, according to Fitch Ratings, noting that "there is still little evidence to suggest AAA rating will come under threat over usual rating horizon of about two years."
The Kiwi, which was battered during Monday, as local banks turn more dovish on their view over the RBNZ rates outlook, managed to hold its ground circa 0.7350, although it looks as though further losses may be in store judging by the NY close levels, with traders happy to hold onto gains with little profit taking.
The Japanese Yen was slightly weaker, last at 120.20 after a close in NY at 120.09. The last COT report showed spec account adding Yen shorts quite aggressively once again, suggesting that the risk is once again turning to the upside, with 120.50 next target now.
Main headlines in Asia
Australian Treasurer Hockey: Budget to beat market deficit forecast
Australian home loans beats expectations in March
New Zealand: Annual House-Price Inflation accelerates to 9.3%
Australia's AAA rating is not at risk - Fitch
Heading into Europe
The Australian budget announcement at 9.30 GMT will make most of the headlines, expected to reveal a deteriorating fiscal stance. Since the Australian government has been telegraphing the worsening budget for months, reaction to the budget in the Aussie should be quite limited, although in the medium-term, unless the definit can be addressed, it will continue to raise concerns over the ability of Australia to maintain its AAA sovereign rating.
According to Paul Dales, Chief Economist Australia/NZ at Capital Economics, "while Tuesday’s Federal Budget may well live up to the “dull” label slapped on it by the Prime Minister, the failure to provide any extra support to the economy will be disappointing, and would place an even greater burden on the Reserve Bank of Australia (RBA) to cut interest rates further."
"What’s more, we think the cash deficit will remain further away from balance for longer than the Treasury expects, which would put more downward pressure on the Australian dollar," Dales added.
Westpac wrote the following earlier today: "We look for the government to announce a 2014/15 deficit around –A$43bn, improving only to -$41bn in 2015/16 (-2.7% to -2.5%/GDP). However local media suggest 2014/15 could be announced as narrower than -$40bn (a year ago the forecast was -$29.8bn). The budget should be projected to remain in deficit through 2017/18 (-$22bn/-1.2%/GDP). Net Commonwealth debt should rise to $350bn, 19%/GDP by 2017/18, up from 17% in the mid-year review, still very low by OECD standards."
Brian Daingerfield, FX Trading Strategist at RBS, notes: "The worsening fiscal picture is another medium-term concern that may weigh on the AUD. Even-so, the AUD has been supported in the near-term by position clearing – the latest IMM report shows investors are now net long of AUD for the first time since last September - and a more constructive- sounding RBA, even despite a downgraded growth assessment in the Statement on Monetary Policy."
The Australian Dollar managed to catch a firmer bullish tone, moving over 35/40 pips from is day lows just under 0.79 to print its highest at 0.7923 ahead of the Australia's budget announcement at 9.30 GMT, in which a deficit of AUD 40-41 bln is expected.
Treasurer Hockey said, via Bloomberg, that the budget is set to beat market deficit forecast of AUD 40-41 bln, adding that the country is on trajectory back to budget surplus, while adding that the budget will focus on strengthening the economy.
The Aussie was also boosted by news that Australia's AAA rating is not at risk, according to Fitch Ratings, noting that "there is still little evidence to suggest AAA rating will come under threat over usual rating horizon of about two years."
The Kiwi, which was battered during Monday, as local banks turn more dovish on their view over the RBNZ rates outlook, managed to hold its ground circa 0.7350, although it looks as though further losses may be in store judging by the NY close levels, with traders happy to hold onto gains with little profit taking.
The Japanese Yen was slightly weaker, last at 120.20 after a close in NY at 120.09. The last COT report showed spec account adding Yen shorts quite aggressively once again, suggesting that the risk is once again turning to the upside, with 120.50 next target now.
Main headlines in Asia
Australian Treasurer Hockey: Budget to beat market deficit forecast
Australian home loans beats expectations in March
New Zealand: Annual House-Price Inflation accelerates to 9.3%
Australia's AAA rating is not at risk - Fitch
Heading into Europe
The Australian budget announcement at 9.30 GMT will make most of the headlines, expected to reveal a deteriorating fiscal stance. Since the Australian government has been telegraphing the worsening budget for months, reaction to the budget in the Aussie should be quite limited, although in the medium-term, unless the definit can be addressed, it will continue to raise concerns over the ability of Australia to maintain its AAA sovereign rating.
According to Paul Dales, Chief Economist Australia/NZ at Capital Economics, "while Tuesday’s Federal Budget may well live up to the “dull” label slapped on it by the Prime Minister, the failure to provide any extra support to the economy will be disappointing, and would place an even greater burden on the Reserve Bank of Australia (RBA) to cut interest rates further."
"What’s more, we think the cash deficit will remain further away from balance for longer than the Treasury expects, which would put more downward pressure on the Australian dollar," Dales added.
Westpac wrote the following earlier today: "We look for the government to announce a 2014/15 deficit around –A$43bn, improving only to -$41bn in 2015/16 (-2.7% to -2.5%/GDP). However local media suggest 2014/15 could be announced as narrower than -$40bn (a year ago the forecast was -$29.8bn). The budget should be projected to remain in deficit through 2017/18 (-$22bn/-1.2%/GDP). Net Commonwealth debt should rise to $350bn, 19%/GDP by 2017/18, up from 17% in the mid-year review, still very low by OECD standards."
Brian Daingerfield, FX Trading Strategist at RBS, notes: "The worsening fiscal picture is another medium-term concern that may weigh on the AUD. Even-so, the AUD has been supported in the near-term by position clearing – the latest IMM report shows investors are now net long of AUD for the first time since last September - and a more constructive- sounding RBA, even despite a downgraded growth assessment in the Statement on Monetary Policy."