Australian Dollar Outlook 5/8/2010

Better than expected data out of the US overnight has been the main contributor to the positive tone. Equity markets across the northern hemisphere rallied, as did commodity prices.

Yesterday's better than expected Australian trade data has also provided some solid support for the AUD.

The trade surplus came in at close to double the result the market had been expecting, reflecting a very solid result for the Australian export market.

The AUD has also managed to gain some solid ground on some of the crosses, with AUD/EUR currently trading close to EUR0.6950 and AUD/GBP around GBP0.5750.

Expect the AUD to remain relatively well supported during today's local session as we await tonight's offshore session to provide an idea of where the AUD may be heading next.

Majors: In recent times the market's focus appears to have shifted away from the European debt crisis and back towards the uncertainty surrounding the economic recovery in the US.

Last night was a further example of this with the market paying very close attention to the release of US jobs and manufacturing data.

Payroll company ADP reported that private employers increased their hiring level last month, while the Institute for Supply Management's service sector index rose unexpectedly in July.

Recent economic reports out of the US seem to be showing a mixed picture on the state of the US economy.

Speculation had been increasing that the US Federal Reserve would move to provide further stimulus after last week's comment from Ben Bernanke that the outlook remains unusually uncertain, but recent economic releases, such as those overnight, have now lead many to believe the Federal Reserve will remain on the sidelines.

The release of the US Labor Department's monthly report on Friday is now the next key announcement the market is waiting for.

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