Bell FX Currency Outlook: The Australian Dollar continued to outperform overnight on news that European leaders have agreed to a new fiscal pact and a permanent bailout plan for the Euro zone.

Australia: During our local session yesterday, the Australian NAB Business Survey was released. The report indicated that business confidence rose by 1 point to +3 while business conditions were steady at +1.

The AUD gained on the cross rates, trading to EUR0.8115 against the EUR, while AUD/GBP touched GBP0.6775. While the AUD continues to be the currency of choice for investors given the yield return, the AUD may see some profit taking heading into next week's RBA meeting.

The AUD/USD has rallied 9 cents over the past month so importers might consider taking advantage of the move for at least of a portion of outstanding exposures. With central banks around the world reducing or keeping interest rates at very low levels to try and spur growth, locally the RBA do have room to cut and a 25bp rate cut at next week's RBA meeting is currently priced in by the market.

Majors: Overnight the main focus was on the agreement of the Euro zone leaders for the bailout following the EU leader's summit. European equity markets responded positively as did the euro which traded through USD1.3200 in early trading. While comments and agreeing that something needs to be done sound great, no real plan was announced on how to get the European unemployment rate down.

The EUR was subsequently sold off and is currently trading around USD1.3085 against the US Dollar. The Eurozone unemployment data released overnight reported an increase in the number of unemployed to 10.4% in December from 10.3% in November, while German unemployment fell to 6.7% from 6.8%.

German retail sales data for December was disappointing reporting a fall of 1.4% - worse than the -0.8% the market was expecting.

Meanwhile in the US, consumer confidence data disappointed with the index falling to 61.1 in January from 64.8 in December. The Case-Shiller house price index reported a fall of 0.7% in November, below the market expectations for a fall of 0.5%.
Economic Calendar
01 FEB AUS House Price Index Q4
AUS HIA NEW Home Sales Dec
CH PMI Manufacturing Jan