Dollar falls as traders stop to review uncertain outlook
14.34 AEDT, Thursday 31 January 2013
Dollar falls as traders stop to
review uncertain outlook
By Ben Taylor (Sales Trader, CMC Markets)
With the S&P 4% from its record set in 2007 and the Dow only 2% from its all-time high traders have spent the day contemplating the catalyst to continue to push our upward trend. The lack of confidence in the US this week was over looked but a first estimate GDP figure was all too much for a market screaming overbought.
However, the US GDP miss does need to be taken with a grain of salt; Hurricane Sandy and the height of the fiscal fears are clearly lurking in this result. Business hiring, investing and purchasing intentions were also skewed from a lack of clear guidance over the fiscal cliff and its implications. The figure was not helped along by a fall in US government military spending.
Despite the Fed reaffirming its ongoing asset purchase and zero interest rate policy, which should see the Aussie dollar rally on USD weakness, we have instead seen the Australian dollar fall today. Traders have sent the Aussie dollar lower over the last 24 hours after reviewing their outlook for the macro environment, the need for further cuts to domestic interest rates, and an unprecedented seven months of political uncertainty until the election.
Investors have been furiously considering the political impact of a change of government given we now know the election date. The impact of new a broadband policy, scrapping the carbon tax, repealing the mining tax as well as other reform risks are being swung through analyst’s models today in an attempt to stay ahead of the pack.
I believe risk will be off the table and the markets mood will be one of consolidation until next week after we have more clarity over the all-important non-farm payrolls and US unemployment read.