European Open: Aussie dollar at 4-month high, euro subdued

FXStreet (London) - The Australian dollar hit a four-month high overnight against the US dollar following a cautiously bullish speech from Reserve Bank of Australia governor Glenn Stevens. Speaking in Hong Kong, Stevens predicted a boom in Australian housing construction, however warned that he had concerns over the level of leverage in the market. “We are going to have a boom in residential construction over the next couple of years. That is very much on track,” said Stevens. He added that: “The long-running equilibrium of the exchange rate is probably lower and we have been quiet consistent in saying that,” however, the Aussie dollar rallied following the speech, hitting a high of USD0.9209, up 0.51 percent and remains in bullish territory.

The euro will likely remain subdued today with little of note on the calendar. The single currency was put under pressure yesterday by further poor numbers coming out of Germany, with the Ifo Institute’s German business climate index falling to 110.7 from 111.3 last month. EUR/USD currently stands at USD1.3820 after mild bearish trading overnight.

A similarly light day ahead in the US, where the most significant release is likely to be the durable goods reports. Consensus expectations are for orders to increase 2.5 percent month-on-month, making up for last month’s 1 percent drop. Orders ex-transport are expected to be more subdued, up 1.5 percent month-on-month.