Australia: The volatility in financial markets continued on Friday’s trade but thankfully not to the same extent as seen the previously. With discussions on the EUR still dominating the market the AUD traded down to a low of 0.8809. Equity markets reflected the concern on stabilising the EUR with European indices off by 4.3% in Paris, 3.3% in Frankfurt and the London FTSE also down by 2.6%. The US equity market recovered during the day from the sell off on Thursday, but still fell another 1.3%, in the Dow, with the S&P 500 down a further 1.5%. There was good news out of the US with non-farm payrolls rising by 290k in March, above the 190k forecast, and of which 66k were short-term US Census workers. Although unemployment increased to 9.9%, there were more workers encouraged by general job prospects as the participation rate increased from 64.9% to 65.2%. The recovery process continued with consumer credit rising by US$2bn in March, which exceeded projections of a decline of US$3.7bn. This news from the US is still overshadowed by the emergency meetings held over the weekend to stabilise the EUR, which fell to a 14 month low against the USD last week. It is expected that a package of EUR500bn is likely to be formalised shortly. Words from the European Commission President Jose Barroso that “we will defend the euro, whatever it takes” and the Swedish Finance Minister’s comments that the market is exhibiting “wolfpack behaviour” underlines the gravity of the situation. The expectation that an official announcement is imminent has seen the EUR recover against the USD from its recent lows. Unless a package is announced shortly the decline of the EUR could continue.
In Australia, all eyes will be on the budget Tuesday night with business surveys, jobs data and housing finance all set to be released his week.
Majors: The AUD cross rates have all deteriorated from their highs of the last several weeks as equity markets retreated in light of the EUR crisis and risk aversion again increased. Until there is some resolution of the hung Parliament in the UK the AUD/GBP rate is unlikely to move significantly and the AUD/EUR is likely to trade in a very narrow range until more news is available. AUD/JPY has recovered to over JPY82.00 after its decline to JPY80.00 on Friday morning. The EUR is the focus.