Bell FX Currency Outlook:

After a bullish run throughout yesterday's local session, the AUD has been sold off again overnight.

Australia: Financial markets were in a relatively positive mood yesterday but it all turned a little pear shaped overnight after the Eurozone crisis once again began to grab the headlines. The European Central Bank acted to try and boost liquidity, with the initial reaction being a positive one, but market nervousness began to re-emerge and equity markets, along with the EUR, were sold lower.

Given the risk off environment, the AUD took a tumble against the USD to trade back below USD1.0100. Against the EUR, the AUD continues to outperform, with the AUD/EUR cross rate hitting a new record high around EUR0.7770. Today's local session is expected to be relatively quiet with no local data due for release and thin trading conditions leading into the Christmas break.

Majors: In a massive funding operation overnight, the ECB offered EUR489bio in three year loans to banks; much more than the EUR300bio the market had been expecting. Essentially, the ECB is employing a form of quantitative easing to try and stimulate lending throughout the Eurozone but many fear the banks will now hold on to these funds, particularly in light of the increased capital ratio requirements that have been a hot topic of late.

The outlook for Europe is looking increasingly bleak as we head into 2012. Standard Chartered's Chief Economist, Gerard Lyon, who is regarded by many as one of the world's most accurate forecasters, predicts that Europe faces a deep recession in the first half of 2012. His prediction for the global economy is for a growth rate of 2.2% in 2012, driven mainly by growth out of Asia.

Economic Calendar
22 DEC NZ GDP 3Q
UK Current Account 3Q
US Chicago Fed National Activity Index NOV
US House Price Index OCT