Bell FX Currency Outlook: The Australian dollar has risen this morning to the high 1.0700's after China's weekend move to yet again lower the reserve requirements it imposes on its banks.

Australia: With the Greek debt situation awaiting a meeting later today between the 17 Eurozone finance ministers to approve the bailout package, the AUD has benefitted from a cut in the Chinese reserve ratio of 50 bps from 21% to 20.5% effective February 24.

This is the second reduction in the amount of deposits banks must hold against the value of their loans in three months, and analysts are predicting there could be two or three more downward moves to keep the economy growing at the 8% pa level this year.

Increases in the reserve requirements last year seem to have had an effect by moderating the significant price increase that has affected the property market. A recent survey revealed home prices declined in January in 47 of the 70 largest Chinese cities, none of which registered an increase.

We expect the AUD to trade with an upward bias today after this move by the Chinese. Tomorrow the RBA's minutes from this month's meeting will be released followed by wage price data on Wednesday and average weekly earnings on Thursday. Trading tonight will most likely be quiet with the US markets closed for the Presidents' Day holiday. Although all markets are keeping an eye on the debt situation in Europe and the Euro finance ministers meeting tonight.

Majors: Greek Prime Minister Papademos announced on the weekend their government has found the extra cuts in spending of EUR125m bringing the total reductions to EUR325m, which should secure a second bailout deal in time for the EUR14.5bn debt repayment due March 20.

Major European and US equity markets were all higher on Friday as they anticipated a deal would be done. UK retail sales were better than expected for January rising 0.9% versus the decline of 0.3% predicted.

US CPI for January rose 0.2% and 2.9% for the last 12 months and an index of leading indicators rose 0.4% in January, both in line with expectations. President Obama and Congress in a rare bipartisan event agreed to the extension of unemployment insurance and the lower payroll tax from the end of February to the end of 2012.

Economic Calendar
20 FEB JN Adjusted Merchandise Trade Balance JAN
UK Rightmove House Prices FEB
EC Euro-Zone Finance Ministers Meeting
IT Bank of Italy Saccomanni Speaks in Rome