Bell FX Currency Outlook
The AUD is looking vulnerable, currently holding just above USD0.9500, after reports that Greece will miss its budget deficit
argets in 2011 and 2012.

Australia: The news regarding Greece continues to dominate the headlines and weaken global market sentiment, despite some better than expected manufacturing data released overnight. The statement that Greece will miss these targets all but guarantees they will default at some stage in the near future; and with European officials and world leaders still yet to agree on any firm bailout plan for the region, we will continue to see markets react adversely to news out of the Euro-zone.

Equity markets followed the trend down across all the regions; in the US the DOW was off 1.3%, the S&P 500 down 1.7%, and the Nasdaq the worst falling 2.2%. In Europe, Germany's DAX retreated 2.3% and the FTSE100 was 1% down.

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Today all the focus will be on the RBA's interest rate meeting, with the decision to be announced at 2:30pm AEST. While most economists believe that they will continue to hold firm and leave interest rates at their current level of 4.75%; they aren't discounting the possibility of a surprise 'emergency' cut. Should they remain on hold, then very close attention will be paid to the accompanying statement to find any hints at their current thinking.

Markets are almost fully pricing in an interest rate cut of 25bps at their next meeting, and will focus on any mention of the current inflation levels or global economic unrest in today's release, to firm up their outlook. Should the RBA fail to validate the markets expectations of a rate cut next month, then this could provide some short-lived support for the AUD.

Majors: The USD was the 'flavour of the month' last night as continued bad news out of Europe saw investors flock to the 'safe haven' currency. Despite the positive data out of the US overnight, which usually sees an increase in risk sentiment and the selling of the USD, the USD experienced gains in almost all of the currency pairs. To say that manufacturing data out of the US in recent months has been poor is somewhat of an understatement.

Therefore. last night's better than expected ISM index was a real boost for the sector. The index rose to 51.6,

well above market expectations of a drop to 50.3. Despite this result, it did little to reduce the uncertainty of the market. The EUR/USD is currently trading below the psychological level of USD1.3200 and hit an 8½ month low overnight on the Greece news. Against the JPY the EUR hit a new 10year low.

Economic Calendar
04 OCT Aus Trade Balance
Aus RBA Cash Target
EU Eurozone PMI
US Fed Chairman Bernanke Speaks

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