Bell FX Currency Outlook:

The Australian Dollar has opened trading this morning just below parity, after an uneventful offshore session on Friday.

Australia: We saw very little volatility on Friday in currency markets (for a change). The AUD traded in a fairly narrow band, as the major indices in Europe finished marginally lower, with the Euro Stoxx 50 index the weakest after a fall of 1%, and the US finishing slightly higher (the NASDAQ the best performing index rising 0.6%).

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The ratings agency Fitch grabbed most of the headlines after putting France on negative credit outlook and warning they may cut the ratings of six other European countries. Gold rose to just under US$1600 an ounce but still finished the week lower which was its largest decline in three months.

Oil fell slightly but most base metals were higher on Friday in light of some of the better recent economic data out of the US. News flow in the near term will continue to be dominated by events out of Europe. Leading up to the Christmas holiday there will be little new news except for the RBA minutes which are to be released tomorrow morning which may reveal the RBA's discussions on future interest rate reductions.

Majors: Fitch's warning that the credit ratings of Belgium, Spain, Slovenia, Italy, Ireland and Cyprus may be cut and their comment that a solution to the European debt crisis was "technically and politically beyond reach" dominated the news flow. Another ratings agency, Moody's, cut Belgium's credit rating by two notches as they were sceptical of the ultimate cost of the bailout of the financial firm Dexia.

Somewhat contradictory to this was a fall in bond yields for Spain and Italy. US CPI data released on Friday was in line with expectations rising 3.4% yoy. Later today there is some US housing data from the NAHB (National Association of Home Builders) but generally this week will see no significant new data announcements.

Economic Calendar
19 DEC US Fed's Lacker (non-voter) to speak in Charlotte
EU Euro-Zone Current Account OCT
EU ECB Calls For Bids in 7-Day Main Refinancing Tender
JN Cabinet Office Monthly Economic Report