Bell FX Currency Outlook: The Australian Dollar remains stronger this morning having outperformed both the EUR and NZD in the process.

Australia: The markets were somewhat disappointed with Federal Reserve Chairman Ben Bernanke's lack of commitment to further quantitative easing scenarios at the Humphrey-Hawkins testimony. That said, sentiment found a way to rebound as consensus then turned positive in thinking there is scope for further stimulus.

US equities and oil prices rose in choppy trade as Bernanke stated policymakers would consider a range of tools to further stimulate growth if it became clear the labour market was not improving or if deflation risks mounted.

US equities were also supported by stronger-than-expected earnings from Goldman Sachs and Coca-Cola. July's RBA Minutes were released yesterday and suggested the Bank is comfortably being on hold for the moment, having deliberated at length as to whether to cut rates again (or not).

The conclusion was that slower global growth and a low inflation outlook led to the final decision being current monetary policy settings were appropriate, on the back of the 75bp easing in 2012. The feeling is forthcoming local data will be soft and next week's CPI will be as well, and this could set the stage for further easing.

Today's main focus will be BHP's Q2 production report and looking ahead, Australia's Q2 CPI data due Wednesday next
week is definitely the main focus.

Majors: The USD temporarily strengthened on the early reaction to Bernanke's comments but returned to its downward trend thereafter.

Signs of a recovery in the US housing market were very well received with the US NAHB Housing Market index rising sharply in July, its highest level since March 2007. US CPI inflation in June printed in line with market expectations, with headline prices unchanged in the month to be up 1.7% y/y while core (ex-food & energy) prices rose by 0.2% m/m and 2.2% y/y.

Meanwhile, US industrial production in June also printed broadly in line with expectations (+0.4% versus market expectations of +0.3%) but capacity utilisation was lower than expected. Elsewhere, the Bank of Canada left its policy rate unchanged at 1% and modestly downgraded its growth forecasts for 2012 and 2013 and in the UK, the CPI fell 0.4% m/m in June. Tonight, the UK has labour market data due and the Bank of England will release its latest Monetary Policy Committee Minutes.

In America, the Fed's Beige Book is released and Ben Bernanke will address the US House of Reps, likely to be a re-run of last night's views but the markets will be alert for any further clues to future Fed policy.
Economic Calendar
18 JULY AUS Westpac Leading Index m/m May
CH China June Property Prices
UK BoE Minutes
US Housing Starts Jun