AUD

The February Australian Unemployment Report came out worse than expected, sending the risk pairs toward session lows. The economywas expected to grow by 15,000 new employees, but February’s job growth expanded by only 400. The employment rate came in as expected at 5.3%. The AUD immediately dropped on the release, however finding support again on the trendlne we reviewed yesterday.

The RBA’s Lowe had the following comments on the global economy and China’s policy, the market had a limited reaction to these comments:

• Global action prevented more serious downturn.
• Strength of Asian rebound was a surprise.
• Companies are generally more confident but crisis has made them more cautious.
• Capital spending plans still ‘a bit’ below average.
• China policy tightening encouraging.
• China policy actions are positive development.

Australian Business Confidence and Conditions were released better than the prior month moving the AUD off session lows and back above the 91 cent handle. NAB Business Confidence came in at 19 versus the prior reading of 15 and Conditions came in at 8 versus the prior reading of 3.

The Aussie Q4 GDP came in better year over year and as expected quarter over quarter, however much better than the Q3 readings. The AUD initially gained a bid on the release, but has since subsided to pre-release levels in the middle of the 90 cent handle against the USD. The details of the release are as follows:

GDP (QoQ) - Survey:0.9%   Actual:0.9%   Prior:0.2%

GDP (YoY) - Survey:2.4%   Actual:2.7%   Prior:0.5%

The market anticipated a 25 basis point hike in the Australian interest rate and the market got it this time around as the RBA raised rates to 4%. The AUD/USD pair quickly popped to .9031, however has since moved below the 90 cent handle as this hike has been built into the price for sometime. The accompanying comments from the RBA did not help the AUD sustain its early bid, the comments were as follows:

A mix of both positive and negative economic releases out of Australia gave the AUD/USD pair a quick run up before trading down to levels lower than it was prior to the release. The seasonally adjusted Retail Sales figures came in much better than expected for January at +1.2% versus the expectation of +0.5% and the prior release of -0.7% (revised lower to -0.9%.) However, the Building Approvals came in much worse for January which sent the AUD initially lower. This is all in prelude to rate decision expected at 10:30 pm est.

RBA Governor Stevens had the following comments in a speech in Melbourne Australia, the markets has had a limited reaction to this comments:

• Wouldn’t hurt Australia Banks to have more capital.
• Australian Banks have weathered the global crisis well.
• ‘Foolish’ to think everything in Australia is peachy.
• Australia can come out of the crisis better than most.
• Australia’s action during the crisis worked.

Also, released was the TD Securities February inflation index rose 1.9% year over year and 0.1% month over month, both lower than the prior reading.

The AIG Performance of Manufacturing Index for February came in stronger than the prior month at 53.8 versus 51 in January. The market has had a limited reaction to this release as a quiet start to the trading week has the risk and commodity pairs lightly better bid.

Upon the release of comments made by RBA Deputy GOV Battellio in Sydney about the mining boom, the AUD/USD traded slightly higher pushing new session highs of .9021. Details of the release are as follows:

• Australia is better able to cope with mining boom.
• Floating currency helps economy cope with mining boom.
• Mining investment may “rise further” as share of GDP.
• Boom poses “complex challenges” for policy makers.
• Exchange rate till continue to rise on investment.
• Current account will probably deteriorate.
• At the moment, inflation still to come down.
• Mining boom may restrain other parts of the economy.

Speaking at the Center for Economic Development in Australia, RBA Assistant Gov Lowe made the following comments:

• Government stimulus helped Australian economy.
• Stimulus needs to be wound back as GDP grows.
• Issue is speed and timing of stimulus.
• Stimulus spending to be wound back on recovery.