Aussie dollar on the back foot

11.15 AEST, Monday 13 May 2013

Aussie dollar on the back foot

By Niall King (Premium Client Manager, CMC Markets)

The Australian sharemarket has opened cautiously higher this morning, following another strong performance from its international peers on Friday.

With the annual Budget looming, an early session drop by the Materials sector has been offset by gains in other sectors with Financials and Industrials in the green. Coupled with attempts by central banks around the globe to breathe life into their economies, strong corporate earnings have continued to lead international equity markets north.

Although still some distance from the Fed's target level, the unemployment scene in the US is brightening while the housing market recovery rumbles forward. Sceptics of current easing measures are bound to grow in numbers as a result, but the question remains how long this will take to feed through to investors and reign in bull market momentum.

Fresh from last week's battering, the Aussie dollar has started the week on the back foot, struggling to retain parity against the greenback. As speculation mounts that stimulus will be reduced, the increasing relative strength of US dollar has, as a bi-product, eased some headaches for Australian exporters at least.

With further easing leeway up their sleeve if necessary, local data continues to be monitored by investors for clues to the next RBA move. This morning’s Home Loans and NAB Business Confidence will give the local market with something to chew on ahead of tomorrow's Budget. Looking further afield, Retail Sales data from the US this evening could well provide short term direction for international equity markets.

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