FX DAILY REPORT

TUESDAY JULY 19TH 2011

Bell FX Currency Outlook

The AUD is holding just above USD1.0600 this morning as the market await the RBAs July meeting minutes to be released at 11:30am AEST. Australia: Concerns over the continuing debt crisis in Europe and the fear that the US may not come to an agreement about raising the debt ceiling in the region, saw risk aversion trading during the offshore session; with the AUD reaching a low of USD1.0561 overnight. Equity markets in the US and Europe were both lower, with US equities down as much as 1.5% early on in the trading session. They recovered to only be down 0.8% (DOW & S&P 500), as reports came out that the US may be moving closer to some kind of plan to raise the debt ceiling. Republicans are planning to put forward an USD2.4trillion cut, cap & balance plan, but this is unlikely to be passed in the senate. Therefore the back-up plan is being proposed which will allow President Obama to increase the debt ceiling in 3 stages, until the presidential election in 2012. As mentioned above, local investors will be paying close attention to the minutes from last months RBA interest rate meeting; especially since the markets are now pricing in an interest rate cut of 25bps by the end of 2011. Previous statements outlined their continual concerns over the international developments and problems in the offshore economies, but recently our poor retail sales and housing data has seen concerns shift to the growth in our local economy. In the past the RBA has stated that they still see that the growth in the medium term will be on trend or higher and that they maintain a medium term tightening bias; so it will be interesting to see if their stance on these areas change at all. Markets will be paying close attention to the release and could see the AUD fall further if there is any change in the language to suggest that an interest rate cut is more likely. Majors: The EUR/USD was weaker, but rebounded off USD1.4000, as
the markets digested the results of the bank stress tests. Many are concerned that the tests werent stringent enough, and that they didnt include the potential of Greece defaulting; which makes it hard for investors to take much out of the results. Contagion concerns are the main focus as the EU leaders meet on Thursday to further discuss the crisis. Investors are cautious in the lead up to the meeting with fears that the meeting may come and go without finalising terms for a second Greece bailout.
Economic Calendar 19 JULY

Australian Dollar / US Dollar

1.10 1.00 0.90 0.80 0.70 0.60 Sep-05

Sep-06

Sep-07

Sep-08

Sep-09

Sep-10

Sep-11

Todays Forecast Range

USD 1.0530 - 1.0660

Currencies AUD / USD USD / JPY EUR / USD GBP / USD NZD / USD AUD Crosses AUD / JPY AUD / EUR AUD / GBP AUD / NZD AUD / CAD Australian Rates Official Cash 3 Month Bill 10 Year Bond US Rates Fed Funds 3 Month Libor Last 1.0605 79.06 1.4103 1.6055 0.8436 Last 83.85 0.7515 0.6603 1.2567 1.0181 Last 4.75 4.84 4.91 Last 0.25 0.250 2.91 Last 1605.10 96.16 343.81 Last 4472 12385 5753 21805 9974 0.250 2.91 - / + (%) +0.2 +0.2 -0.7 - / + (%) 0.0 -0.8 -1.6 -0.3 +0.4 5.00 4.91 Previous High 1.0658 79.18 1.4162 1.6149 0.8490 High 84.30 0.7563 0.6613 1.2628 1.0197 Previous Low 1.0561 78.93 1.4015 1.6005 0.8414 Low 83.54 0.7512 0.6578 1.2534 1.0129

AUST RBA Board Minutes US Housing Starts Jun US Building Permits US Fed Hoenig Speaks

10 Year Bond Commodities Gold (US$ / oz) Oil (WTI) US$/bbl) CRB Index

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