Bell FX Currency Outlook:
The AUD is slightly stronger this morning after news filtered out of Europe that plans for a new treaty and fiscal rules in the region has been agreed upon.

Australia: This has buoyed the markets overnight and has given investors' confidence that come Friday, the European leaders will be able to reach an agreement. As a result the AUD traded above USD1.0300, but it has since lost ground, following a late retreat in equity markets, to be currently trading around USD1.0260.

Locally today all of the focus will be on the RBA's decision, which will be handed down at 2:30pm AEDT.

Markets and economist are extremely divided as to what will happen to our local interest rates. Many are of the belief that the RBA will wait until a large round of local top tier data is released later this week; including 3Q GDP data and unemployment data, as well as the outcome from the meeting of the European leaders Friday night local time.

Should the RBA hold firm and keep the cash rate at 4.5%, it is expected that there will be some outsized reactions on local markets after the announcement. As always, close attention will also be paid to the accompanying statement for hints of further movements, their outlook on the global sovereign debt risks as well as our local demand.

Majors: As mentioned above, German Chancellor Merkel and French President Sarkozy announced plans to establish a new treaty among the current 17 European Union members (but would ideally include all 27 countries), with plans that include stricter enforcement and sanctions for states who exceed their deficit levels and fiscal rules.

Some may argue that this isn't much different than the current rules in place, which have yet to work, but the continued work towards helping the region did boost the markets.

The gain in the markets were however short-lived as it was reported that the S&P are placing all 17 members of the European Union on a negative credit watch. Equity markets across the board still posted gains with the DOW up 0.2%, the S&P500 up 0.6%, and over in Europe saw gains from 0.3% up to 1.1% on the Euro Stoxx 50.

Economic Calendar
6 DEC Aust RBA Cash Rate decision
Aust Current Account Balance
Euro-Zone GDP
German Factory Orders