Australia: Fears of a double dip recession in the US and very low growth in Europe have pushed the AUD down from the high 1.0400’s to the high 1.0300’s this morning.

The AUD has held up fairly well in the light of further equity market weakness that saw all major indices fall again on Firday. With major European indices falling 1% (FTSE 100) to 2.2% (the German DAX and Euro Stoxx 50), the trend continued in the US, with the Dow off another 1.6% to 10,817, the S&P 500 1.5% to 1,124 and the NASDAQ 1.6% to 2,342.

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With turmoil everywhere in equity markets, gold hit a new record high of US$1,878 an ounce for its biggest weekly gain since 2008. The oil price (Brent) was up in Europe but slightly down in the US (WTI crude) as the gap between the two indices has widened to its highest level ever (US$26 a barrel).

There is not a lot of data being released this week in Australia with the highlight being Wednesday’s release of Q2 construction data, although speeches by RBA Deputy Governor Battellino (Tuesday) and Governor Stevens (Friday), might give a further indication on the likely path of local interest rates.

Majors: With the USD trading at a post WWII low against the JPY on Friday (USDJPY sub 76), it is thought there is a strong possibility that the Bank of Japan will intervene in the market on its own bat to weaken the JPY in a similar fashion to the actions taken by the Swiss National Bank on the CHF recently.

The European sovereign debt crisis continues to bubble along in the background with Germany rejecting supporting an
ECB Eurobond issue that has been discussed in the last several weeks. Later this week the eyes of the market will focus on the annual US Fed
Reserve conference in Jackson Hole, Wyoming where Fed Chairman Bernanke may provide guidance to the market of the possibility of another
round of further quantitative easing.