Bell FX Currency Outlook:
Financial markets focused on the credit downgrade of the sovereign debt of nine European nations by S & P on Friday that again highlighted the debt woes that Europe faces.

Australia: The Australian dollar traded into the low 1.0200's on Friday evening as the credit ratings of France and Austria were lowered from AAA status to AA- and seven other nations saw their credit rating cut as well. Although this was rumoured to be on the cards, the official announcement came after the markets closed so the reaction may be more significant once Europe and the

US open for trading this week. With the US celebrating Martin Luther King Day today, we may have to wait several days to see how US markets react. Major equity indices were modestly lower in Europe and the US with losses around the 0.5% level while gold and oil were also slightly weaker at 0.7%. Today ANZ job ads data is to be released along with inflation and housing finance figures for December.

We expect inflation to have been flat for December and housing finance to register a small increase of 1%. Later in the week, Chinese GDP data for December will be released along with Australia's employment data.

Majors: S & P's credit downgrading also knocked down the credit rating of Slovenia, Slovakia and Malta down by one notch, Spain, Italy and Cyprus by two notches and Portugal was lowered to "junk" status. Germany remains the only European country with a stable AAA rating after the AAA rated Finland, Netherlands, and Luxembourg were also placed on negative watch.

With these moves the European Financial Stability Fund's AAA rating might have to be downgraded as well due to the general downgrade of the European nations that guarantee its obligations.

Greece was again in the spotlight as talks with their private sector creditors who were being urged to accept voluntary write downs of the Greek government debt were having second thoughts. This overshadowed a better than expected preliminary January consumer confidence survey from the US University of Michigan which registered its best level since May 2011.

We expect to see more volatility in coming days as financial markets refocus on the European debt situation.

Economic Calendar
16 JAN NZ Food Price Index DEC
JN Consumer Confidence DEC
AU Job Advertisements DEC
US Martin Luther King Holiday