Australia: The Australian dollar has opened this morning firmly in the mid 0.9800’s after a pretty lacklustre evening of trading. Volumes and volatility are diminishing as we approach the end of year holiday season. Focus was on Europe where the big news was that Moody’s downgraded Irish government debt by five levels to Baa1 from Aa2. This saw the 10-year bond yields move up 17 bps to 8.60%, with the move widely expected. European equities had a soft day, with the Euro Stoxx 50 closing 0.8% lower and the German DAX down by 0.6% although US markets finished modestly stronger. The AUD weakened slightly as the EUR came under pressure and the USD strengthened. Crude oil rose slightly to US$88 a barrel and gold was holding its own at US$1375 an ounce. Base metals in general continued to be firmer. We expect the AUD to be bought on dips but generally trade in the range of 0.9700 to 0.9900 in the near future. The key scheduled event is the release of the RBA Minutes for December on Tuesday.

Majors: After the Irish debt downgrade there was general disappointment with results of the discussion in Europe on Dec 16th and 17th regarding the “debt resolution mechanism “ which saw no real changes to EUR750bn fund already agreed to support the EUR. The EUR had strengthened after a record rise in the German IFO survey rose to the highest level since reunification. Germany continues to be a standout in Europe with forecast growth for this year of 3.6% as compared to 1.7% for the Eurozone. The GBP weakened off against the USD as UK bank Lloyds TSB reported that it would have to increase potential bad debts due to Irish loan losses. With the EUR and GBP generally weaker the AUD cross rates are trading at close to historical highs and AUD/EUR touching above .7500 for the first time ever. UK has Bank of England Minutes and EuroZone has it’s Current Account for Q3 on Wednesday.

More from IBT Markets:

Get this delivered to your inbox.

Follow us on Twitter.

Like us on Facebook.