The Aussie weakens after Greek elections

THE deepening Greek debt crisis has continued to weaken the Aussie Dollar as political instability prevails in the European country. The Aussie traded at 1.5985 AUD to the British Pound on Friday up from the 1.5868 AUD on Monday.

The Greek Parliamentary Poll held on Sunday left investors uneasy as no clear coalition has been formed.  Syriza party leader Alexis Tsipras warned that the “the popular verdict clearly renders the bailout deal null”. The political instability combined with the European Central Banks’ forecast of a contracting economy in 2012, diminished investors risk appetites across emerging markets.

Thursday saw a small recovery as Australia released stronger than expected labour data. The Australian Bureau of Statistics reported the nation’s unemployment rate at 4.9 percent, a 0.3 percent drop which resulted in 15 500 jobs being added to the economy during April. This positive economic news dampened investors’ expectations around the Central Bank possibly cutting the Cash rate.

Falling Chinese food prices was a driving factor behind the 0.2 percent drop in the county’s April CPI inflation when compared to 3.6 percent in March. The targeted annual growth for 2012 is 4 percent as potential social unrest could follow soaring prices. The producer-priced Index exceeded expectations by falling 0.7 percent which is the biggest slide since November 2009. The easing monetary pressure in Australia’s biggest trading partner could create room for both fiscal and monetary policy easing in an attempt to stimulate growth.

All eyes will be on the Eurozone this week as investors wait to see what developments unfold with regard to Greece’s political and membership status in the EU.

GBP / AUD: 1.6033
EUR / AUD : 1.2885         
USD / AUD : 0.9976
NZD/ AUD : 0.7825

Exchange rates as of 08:36, 14 May 2012

Composed by Elizabeth Britz

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Australian Dollar reverses week’s losses