Bell FX Currency Outlook:
The Australian Dollar remains above USD 1.0400 as US equity markets ground higher following the release of sound US economic data and plans by the IMF to bolster funds for bail-out requirements.

Australia: Headlines prevailed (as always it seems) with the World Bank leading this time around, when they cut the global economic forecast in their 6-monthly update for 2012 from 3.6% to 2.5%. The Euro area is forecast to contract 0.3% rather than rise by 1.8% and the US outlook was also cut, from 2.9% to 2.2% in 2012. Sentiment was shaken with this to begin with, but soon recovered after news that the IMF wants to boost its efforts by a whopping $600bn, with $500bn in extra lending capacity (including the recent $200bn European commitment) and a $100bn "protection buffer".

The IMF also estimates there is a (wait for it) $1tn global funding gap over the coming two years, should the global economy deteriorate. Greek debt talks are progressing with talk of a deal between Greece and its private sector creditors getting closer. The AUD has continued to shine at lofty levels (most still feel it is overvalued). Today sees December's Australian labour data at 11.30am with expectations for a rise in employment of 10,000 jobs and no change in the unemployment rate of 5.3%.

The AUD should stay relatively well supported for the immediate term.

Majors: The US Dollar weakened against most currencies, even the EUR, which enjoyed a boost following the IMF headlines of further possible support for the Euro area. European equities were mixed but finished higher on the IMF news. Oil rose on improved US industrial production data and gold did as well as US Treasuries and the US Dollar both sold to lower levels.

Speculation of easing monetary policy around the world saw solid demand for gold. The US data which impressed the
markets was key industrial production. It rose by 4.0% month on month, driven in the main by business equipment, cars and construction materials. Confidence among homebuilders beat expectations and is the highest since June 2007 further building the case the US economy is indeed starting to move in the right direction with traction.

Economic Calendar
19 JAN AU Employment Change DEC
AU Unemployment Rate DEC
EU Euro-zone Current Account NOV
US Housing Starts DEC