Bell FX Currency Outlook: The Australian Dollar is relatively unchanged this morning as markets continued to consolidate recent moves in what was essentially a quiet session overnight.

Australia: The AUD weakened slightly following yesterday's RBA Board meeting Minutes, despite the Minutes offering no real "new" news.

The discussion of the effects of a high AUD and China's slowdown are putting downward pressure on the AUD and currently the AUD's softness is mainly to be found on the cross rates, particularly the NZD and EUR.

The RBA is concerned about the adverse economic effects from the high level of the AUD and seems to be prepared to ease policy with the deterioration in the global growth outlook.

The RBA highlighted Chinese and other Asian activity indicators had softened, the global economy remained subject to 'significant downside risks', the high Australian Dollar might be 'weighing more heavily on the economy than might be expected' and iron ore and coal prices had fallen more sharply than expected, which could lead to somewhat lower mining investment over the medium term.

The markets feel the RBA will lower the cash rate by 25bps on 2 October and 25bps on 6 November and maintain an easing bias thereafter, which is a stronger easing in monetary policy than only a week ago.

The main reasons for the change of view are that lower commodity prices, coupled with the persistently high Australian dollar and further fiscal tightening will restrain income growth in Australia such that further monetary policy support is necessary.

In Australia today, RBA Assistant Governor (Economic) Kent, will be speaking on 'Structural Changes and the Rise of
Asia' at 11:25 AEST.

Majors: The consolidation across markets came after the QE3 announcement provided rallies in "risk assets". The NAHB September US Housing market Index improved further and Fed Governors Dudley and Evans suggested there is more the Federal Reserve can do if required.

In Europe, Spanish 10-year yields rose back above 6% as the government continues to evade on formally requesting EU/ECB
assistance. The German ZEW survey shows current conditions falling further and supporting the view that the Eurozone is back in recession in Q3, including a weak Germany.

Spot gold rose modestly while base metals prices and agricultural commodities prices were mixed following strong rises in recent days. Today's Bank of Japan meeting should result in additional easing and tomorrow's China Flash PMI will be watched closely.
Economic Calendar
19 SEPT AUS Westpac Leading Index Jul
JN BoJ Target Rate
UK BoE Minutes
US Housing Starts Aug

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