Australia: The Australian Dollar continues to trade with conviction ahead of today’s interest rate announcement by the Reserve Bank. A “no change” result seems very likely, and as is often the case, focus will be on the accompanying statement for an indication of the risks to rate moves in the next 6 months.

There has been weakness in recent Australian data (viz GDP, retail sales and Q3CPI), and markets are now only pricing one more rate rise of 0.25% over the next 12 months.

There weren’t any major data releases overnight and markets took the resulting time to reflect Federal Reserve Chairman Bernanke’s appearance on the US 60 minutes programme Sunday night (US time) justifying QEII, and going further by a) not ruling out more QE if required and b) that a double dip is unlikely.

Gold strengthened 0.8% on “concerns” the US will extend QE, whilst base metals were mixed in a quiet night.

Agricultural commodities were mixed as the ongoing precipitation in Australia boosted wheat prices by a whopping 1.9% with the harvest being delayed, as crops remain drenched.

Yesterday’s ANZ Job Ads indicated labour demand actually picked up a tad in November, ahead of Thursday’s labour force report. We expect a relatively quiet day for the AUD.

Majors: The currency market, as like others, were relatively subdues last night, with no major data or announcements.

Bernanke’s TV interview is the main topic of conversation as he stated an expansion of the Fed’s US$600bn QEII programme is “certainly possible” and that it may take 4-5 years before the US gets back to a “normal” unemployment rate and that a recession “doesn’t seem likely”.

German Chancellor Merkel rejected calls to increase the size of the so-called European bailout fund, her comments widening Greek, Spanish and Italian bond spreads.

A raft of Chinese data is released 13 December and the Federal Reserve meeting on 14 December is also very much on everyone’s radar.

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