The Australian dollar extended its weekly advance overnight, with solid equity market performances from both sides of the Atlantic favouring high-beta currencies across the FX market. The local unit outpaced its major counterparts across the board led by gains against the Euro and Swiss franc, while hitting a six-week high against the greenback. The EURAUD pair maintained a downward trajectory to forge new Euro-era lows of 1.1833 representing a 9 percent fall from May highs. The Euro remained the risk currency of most resistance, under-performing against its major counterparts despite squeezing out moderate gains against the greenback over the course of the session. The EURUSD pair moved higher towards the 1.23-handle over the session setting intra-day highs of 1.2287. At the time of writing the Euro is buying $US1.2280.
Following on from gains across European equities, U.S stocks were able to maintain a steady north-bound trajectory, led by gains in tech stocks after solid earnings from Intel and Honeywell. Despite a consistently negative economic climate, corporate earnings have shown companies are still able to generate profits by cutting the fat, while low expectations leading into reporting season has provided a platform to key off. A jump in housing starts also proved to be positive for sentiment with the DOW and S&P gaining 0.80 and 0.67 percent respectively. The focus was also on Fed Chief Ben Bernanke who gave testimony to House Financial Services Committee and once again failed to provide any explicit detail on the likelihood of further stimulus, but reassured markets the Fed will “take action as needed to try to make sure that we see continued progress on employment.”
Earlier in European trade, the Bank of England policy meeting minutes showed all members voted in favour of maintaining interest rates at 0.5 percent. Seven out the nine committee members voted to increase asset purchases by £50 billion to £375 billion with Spencer Dale and Ben Broadbent voting to maintain the current level of asset purchases. In short, the minutes showed slower rate of economic growth remains a primary concern given the significant headwinds from the Euro-region, while a significant reduction in the rate of inflation has afforded the bank the ample breathing space to take additional easing measures. The minutes also showed members considered both a reduction in the official cash rate and a £75 billion extension in asset purchases which forced sterling to slide in the ensuing period. The latest inflation print after the policy meeting also adds credence to the Bank of England’s recent decision to step-up asset purchases with consumer prices falling to 31-month low of 2.4 percent in June, while core inflation with excludes the volatility food and energy components rose 2.1 percent from the previous year. The Bank of England’s official target for inflation is 2 percent. Meanwhile, Jobless claims in the UK fell to 6,100 in June from a previous 6,900 with the official unemployment rate edging down from 8.2 to 8.1 percent, driven by a surge in hiring ahead of the London Olympic Games.