FX DAILY REPORT

MONDAY JULY 18TH 2011

Bell FX Currency Outlook

The Australian Dollar has opened this week in the mid 1.0600s, largely where it closed on Friday evening after a very weak consumer sentiment report was released in the US for July.
Australia: The University of Michigan survey fell from 71.5 in June to
63.8; significantly below predictions as US consumers show their frustration to the ongoing impasse between Republicans and Democrats on raising the debt ceiling and agreeing to cuts in the US budget. The AUD held up well in light of the negativity of the US consumer and Westpacs prediction that the RBA will have to cut our cash rate by 1% in the next 12 months in light of poor consumer sentiment and spending in Australia. With the early results of Q2 earnings reports from the US filtering through and generally being higher than predicted, the US equity markets moved slightly higher with the Dow up 0.3% and the S&P 500 up by 0.6%. For the week all European and US equity market were lower. Also aiding the markets were the results of the stress tests on European banks by the European Banking Authority whereby fewer banks than expected failed to have adequate capital bases. Gold continues its push toward US$1,600 an ounce finishing just below at US$1,594 an ounce. More central banks are looking at adding to their gold reserves. China has doubled their reserves to 1000 tonnes and the Chinese Chamber of Commerce has chimed in saying they should raise them to 8000 tonnes. If the US embarks on another round of QE easing, gold is likely to move higher. On Tuesday the RBA minutes from their July 5 meeting will be released. Our import figures are out on Wednesday along with more details on the building and construction industries.

Australian Dollar / US Dollar

1.10 1.00 0.90 0.80 0.70 0.60 Aug-05

Aug-06

Aug-07

Aug-08

Aug-09

Aug-10

Aug-11

Todays Forecast Range

USD 1.0575 - 1.0725

Currencies AUD / USD USD / JPY EUR / USD GBP / USD NZD / USD AUD Crosses AUD / JPY AUD / EUR AUD / GBP Last 1.0645 79.07 1.4125 1.6116 0.8474 Last 84.19 0.7533 0.6598 1.2561 1.0158 Last 4.75 5.00 4.91 Last 0.25 0.250 2.91 Last 1590.10 97.24 346.30 Last 4474 12480 5844 21875 9974 0.249 2.95 - / + (%) 0.1 1.6 0.5 - / + (%) -0.4 0.4 -1.0 -0.3 0.4 4.97 4.92 Previous High 1.0691 79.28 1.4249 1.6176 0.8480 High 85.07 0.7579 0.6648 1.2757 1.0311 Previous Low 1.0628 78.89 1.4096 1.6086 0.8381 Low 83.96 0.7515 0.6591 1.2570 1.0142

Majors: The European bank stress tests revealed only 8 of 91 banks

failed to have capital less than 5% of their risk adjusted assets. These banks will have to raise EUR2.5b by the end of 2011. Another 12 banks were deemed to be near fail since their capital was only 5-6% of their risk adjusted assets and they will have a longer period of time to raise additional capital. Many analysts considered these tests to be not tough enough in light of a possible or inevitable as some think default by Greece on their balance sheets. Later this week there is a raft of data to be released on the US housing market.

AUD / NZD AUD / CAD Australian Rates Official Cash 3 Month Bill 10 Year Bond US Rates Fed Funds

Economic Calendar 18 JULY

3 Month Libor AUST New Motor Vehicle Sales JUN EU Foreign Ministers Meet in Brussels JPN Marine Day Public Holiday US Net Long Term TIC Flows 10 Year Bond Commodities Gold (US$ / oz) Oil (WTI) US$/bbl)

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