Last week, US markets returned from the doldrums as investors were encouraged by signs the upcoming quarterly corporate results may surpass earlier expectations. Investors returned from a long weekend to a buyers’ market, aided by better than expected earnings estimates from US bank State Street. This and the general consensus amongst investors that stocks had been oversold helped the key indices record the best weekly performance this year – helping the DOW return above the psychological 10,000 mark. News the International Monetary Fund lifted its estimates for global and US growth also kept global markets well supported.
This however didn’t bode well for the US dollar, which continued to lose ground against major counterparts. In the week ending the July 3rd we witnessed a fundamental shift in the appeal for US dollar as a safety-play, with the greenback losing ground as the US economy recorded softer manufacturing, housing and jobs data. This would generally induce a dollar-positive scenario as investors move to perceived safety; however the dollar continued to lose ground against the Euro. The theme continued last week as US equities recorded solid gains; however the USD dollar index which measures the value of the greenback against major counterparts still recorded losses for the week.
The Week ahead will see the fortunes of the US dollar contingent on slew of corporate Q2 earnings released from market heavy weights such as Alcoa, JPMorgan Chase, Bank of America, Intel and GE. This will untimely decide where the balance of risk falls and further upward momentum from the Aussie dollar will be reliant on a positive print.
The release of key Chinese growth data this week will also be a major market mover for the local unit. Chinese GDP to be released on Thursday is expected to show the Chinese economic growth slowed to 10.5 percent from a previous 11.9 percent. Any significant deviation above estimates will likely induce another round of speculation China will either take further steps to cool the economy which is likely to weigh on commodity markets. At the time of writing the Aussie dollar is buying 87.6 US cents – no change since Fridays close.