Bell FX Currency Outlook: After all the volatility of the last week or so the Australian Dollar starts the week over parity after fairly benign announcements on Friday.

Australia: The AUD retreated only modestly after its recent highs of over 1.0200 last week as equity markets were relatively stable on Friday. All European indices were modestly down after Germany's IFO figures for June were lower than expected which saw the German DAX fall as much as 1.3%.

The situation in the US was better after Moody's had downgraded a number of major US banks but interestingly the market was
encouraged that there were not more downgrades.

Some analysts interpreted this as looking for the good news when it could have been worse and this helped push the major indices all higher with the NASDAQ being the star performer up by 1.2%, S&P500 up 0.7% and the Dow higher by 0.5%.

There were a few wisecracks from analysts saying some of these downgrades were only a year or two late! Interestingly, the largest US bank, JPMorgan Chase, which has been in the headlines of late with its US$2-billion of trading losses, rose over 1%.

This is an extremely light week for data in Australia with only new home sales, ABS job vacancies, and RBA private sector growth being announced on Thursday.

Next week we will hear the RBA's rate decision on Tuesday afternoon and there is a growing consensus there will be no change in the cash rate as the RBA waits to see how the European economic picture plays out.

Majors: German IFO figures were slightly weaker than expected and the USD gained versus the EUR. Leaders from Germany, Italy, France and Spain met over the weekend to discuss how to increase growth in Europe which is likely to the focus of next week's EU summit.

Germany's Merkel still does not support the issuance of Eurobonds for banks or sovereign governments but seems to working towards a new stimulus package that might be worth as much as EUR130bn.

Spanish bond yields continued to fall and traded at a 6.38% yield for a 10 year maturity. Greece was back in the news saying they would be seeking to alter some of the terms of their austerity measures including an extension of at least two years to their deficit reduction plans and a freeze on their public sector lay-offs and more help for the unemployed.
Economic Calendar
25 JUNE GE Germany Bond Auction
US Chicago National Federal Activity Index MAY
JN Small Business Confidence JUN
CA CPI MAY