Australia: The AUD remains very firm this morning after touching another post float high of 1.0175 on Friday night, as the US non-farm payrolls in October rose 151k, as compared to predictions of 60k.

Unemployment remains at 9.6% but there were some positive signs the US economy is slowly picking up with the total payrolls for the last 3 months revised up by 110k.

The better jobs number moved the US share indices slightly higher with all indices up slightly after Europe recorded small gains as well.

Gold touched a fresh high of US$1398 an ounce and oil rallied to US$86.85 a barrel. Soft commodities continued to remain strong as well with sugar still at a 30 year high.

The release of the RBA quarterly monetary statement reduced near term inflation forecasts but projects the core CPI to rise to 3% by December 2012.

This makes further interest rate rises more likely over the next 12-18 months.

There is a slew of data releases this week beginning today with ANZ job ads followed by a business survey from NAB tomorrow along with a consumer confidence figure on Wednesday followed by local labour force data on Thursday where most analysts are predicting a rise in employment of 20k and a unemployment rate of 5%.

China also will announce it's group of monthly data results, for October, which may influence our AUD.

Squeezed in between all this will be the mid-year economic and financial outlook to be released by the Labor Government, which is mooted to contain AUD10bn in spending cuts to ensure that the budget deficit is corrected by 2012-13. We see the AUD retaining it very firm tone in the short term.

Majors: With the better than expected jobs figure in the US, the USD made gains against all the majors which has pushed up the AUD cross rates to higher levels; AUDEUR over .7200; AUD GBP.6260; AUDJPY in excess of 82.

Weaker German factory orders and lower EC retail sales hurt the EUR while many comments continue to be made about the effects of the US QE2 program; the most significant of which comes from the IMF chief economist Blanchard: the Fed's action " makes carry trades more attractive.

The implication for this implies more capital flows outside the US and presumably some dollar depreciation".

We couldn't agree more.

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