Bell FX Currency Outlook: Weaker Chinese data helped push the AUD below 1.0400 on Friday night but the ongoing threat of more central bank stimulus has kept the AUD above the 1.0400 level this morning.

Australia: It has been a constant theme for weeks now but the AUD is being affected by lower world growth prospects in the near term which has translated into lower commodity prices which would generally mean a softer AUD.

The steady stream of buying of AUD denominated debt issued by the federal and state governments of Australia, along with the continued view that the major central banks will provide further stimulus, has buoyed the local currency.

Over the weekend, Fed Chairman Bernanke said in a letter to the House Oversight Committee "there is scope for further action by the Federal Reserve to ease financial conditions and strengthen the economy".

With the annual gathering of central bankers scheduled for this Friday at Jackson Hole, Wyoming, all financial eyes will be on any comments coming out of the meeting.

Equity markets responded in the US to these comments with the major indices all up after more modest gains in Europe. Gold continued to remain firm moving to a 4 month high and finished at US$1,670 an ounce on the threat of more stimuli in the major economies and further debasement of paper currencies.

It is a fairly light week in Australia for announcements with new home sales out tomorrow, and private capex and building approvals on Thursday. We see the AUD testing the downside in the next 24 hours.

Majors: On Friday in the US durable goods orders for July were better than expected rising 4.2% for last month as compared to the 2.5% forecast. With better home sales in the US last week and inventories falling to all-time lows there remains optimism that the US recovery is still happening but at a slower level than was hoped for.

On the weekend German Chancellor Merkel met with Greek Prime Minister Samaras and they reiterated their desire to see Greece remain in the euro.

Mr. Samaras was pushing for some easing on the austerity measures set for his country but no change in the program was announced. The issue of the ECB potentially buying sovereign bonds of some euro members is still bubbling along in the background but it is well known that many German parliamentarians oppose this idea. Later today we will see German IFO business climate figures for August and the ECB's announcements on recent bond purchases.
Economic Calendar
27 AUG UK Public Holiday
CH Industrial Profits JUL
US Fed's Evans (NVM) and Pianalto (VM) Speak
US Dallas Federal Manufacturing Activity AUG