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Friday, October 27, 2006

AUD/USD: Gains Stall As US Yields Bounce; Gold Eases

The AUD/USD is consolidating now under the morning highs of 0.7696. A bounce in the US bond yield in the wake of the strong Michigan sentiment numbers has dampened the AUD rally and similarly, gold has eased off the morning highs. AUD/USD is currently at 0.7684 with offers at 0.7700 and 0.7720. Of note is increasing talk that the drought in Australia will weigh on GDP, shaving off 0.7% of growth, according to ABARE and temper a need for a rate hike.

Though growth will be impacted, some of the negative effect is expected to be mitigated by government packages to help the farmers. The Australian budget remains in a surplus, some of which will be spent to help the rural community weather the drought and have no negative impact on the national finances.

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