Bell FX Currency Outlook

The Australian Dollar is trading just above USD0.9500 following another volatile night in all financial markets, with
the highlight being Fed Reserve Chairman Ben Bernanke's address (testimony) to the Joint Economic Committee.

Australia: In his testimony, Bernanke said "the FOMC now expects a somewhat slower pace of economic growth over the coming quarters" and he did not rule out further monetary stimulus. He added the Fed is "prepared to take further action as appropriate" but added it has no imminent plans for QE3.

Bernanke said that "inflation has begun to moderate" and the Fed "will continue to closely monitor economic
developments and is prepared to take further action as appropriate to promote a stronger economic recovery in a context of price stability".

This drove a late and strong rally in markets with equities rallying strongly and the AUD up US 1.5 cents. Further to Bernanke's commitment to a US recovery, over in Europe, the EU ministers commented on their support of
Euro banks.

The Financial Times reported EU finance ministers are looking at plans to recapitalise Europe's banks, not the first time such
action has been mooted. We wrote last week that the AUD will remain headline driven, along with economic data releases. Never has this been truer than now.

The potential range in the AUD is huge. Against this backdrop, the shift in the RBA's stance yesterday towards an easing bias
is noted. The conundrum continues as this came with the announcement of the second highest trade surplus on record that puts the current account on track to be as low as 1% of GDP by the end of the year.

Should the RBA announce successive cuts, this would still leave the AUD well placed in a yield sense. Decisions!

Today in Australia, retail sales for August are released and we expect a flat outcome after the 0.5% gain in July.

Majors: In Europe, the Greek bailout funding and European banks were all the talk. The Belgian and French finance ministers vowed to "take all necessary measures" to protect Dexia's clients, and will guarantee its debt.

However, Belgium's sovereign debt to GDP ratio was 97% in 2010, which raises further questions on euro-zone debt. US equities were dragged lower in early trading with negative headlines from Europe weighing on investor confidence. However, reports the

European finance ministers were looking to recapitalise banks and financial institutions saw losses reversed in late trading after a stunning 370 point surge in the Dow in the last 45 minutes of the session. Tonight, Services PMI's are released in the US, UK, Europe and India, while the US also releases employment figures for September, ahead of the non-farm payrolls data on Friday.

Economic Calendar
05 OCT AUS Retail Sales Aug
EU Euro zone Retail Sales
UK GDP 2Q