After falling on local employment data yesterday, the Aussie dollar managed to regain ground overnight making a break to the upside of 104 US cents. Moderately stronger U.S equity markets provided tail winds for the local unit with the DOW and S&P finishing up 0.36 and 0.49 percent respectively. The Australian dollar benefited from a positive market demeanor from the Euro region with improvement from debt markets providing a platform for risk assets.
The recent theme of better-than-anticipated U.S employment reports remained a positive driver with US weekly jobless claims falling to 352,000 for the week ending January 14. U.S consumer prices recorded annual growths of 3 percent from a previous 3.4 percent - in line with economists' expectations.
The Euro continued a winning streak with solid demand for European debt underpinning gains. Bond auctions in France and Spain overnight inspired market confidence with solid demand promoting Euro upside with price action supported above $US1.29-figure. Market confidence may be building some momentum, but recent history show's this confidence can dissipate quickly. Greece has re-entered the spotlight as Government and private sector representatives resume talks which could see investor's write-down as much as 50 percent - an agreement is expected to be announced by week-end. Meanwhile, European Central Bank President Mario Draghi has used a press conference in Abu Dhabi to take-up Euro-zone prospects, saying the Euro will be in better shape in 2012 because I look at the progress that has been achieved on the two root causes of the situation, namely lack of fiscal discipline and lack of structural reform.
Local data due for release today is import and export price index data at 11.30 AEDST. We expect the local unit to remain within a tight range throughout the local session with 104.5 US likely to cap any upside. Looking ahead, market participants will be eyeing any news on the private sector involvement in Greece and expect this to be the primary directive this evening in the Euro region. This may represent some closure for market participants should we see favorable terms for Greece, in turn promoting strength from the Euro and risk assets in general. At the time of writing the Aussie dollar is buying 104.1 US cents.