Bell FX Currency Outlook: The Australian Dollar is unchanged from yesterday's levels, trading at USD 0.9800, as currency markets debate the likelihood and even timing of the US Federal Reserve's winding down of its economic stimulus program.

Australia: The series of steady economic data from the US has raised hopes that the Federal Reserve will end its bond-purchasing program aka quantitative easing (QE).

Tonight, Australian time, Federal Reserve Chairman Bernanke will appear before a Congressional committee and a
question on quantitative easing is inevitable. In the very near-term, the depreciation of the JPY has halted.

Unless fresh highs are seen soon, this should help cap the USD more broadly and offer some support to the AUD which has fallen against every currency in the world bar the war-torn Syrian Pound since 12th April.

Yesterday's minutes of the May RBA Board meeting mentioned several factors driving the Board's decision to ease, including their expectation growth would be a little below trend this year, inflation had undershot forecast and the A$ had remained high.

The lower than expected inflation reading for Q1 had provided the RBA with more scope to ease and they decided in the event to use some of that scope.

That said, the absence of any strong hint about the timing of any future move, combined with the realisation the fall in the exchange rate since 7th May has had the equivalent impact of around 0.60% easing, means the market is now only assigning a 14% probability to a further 0.25% cut in June.

Westpac releases its consumer sentiment survey for May but we don't expect much market reaction to it ahead of tonight's main show being the Fed testimony. The AUD is likely to stay pretty quiet and to consolidate ahead of tonight's announcement by the US Fed.

Majors: Currencies generally consolidated overnight ahead of Bernanke's testimony tonight. The GBP was the largest mover, falling sharply following a soft inflation print of +0.2%.

This continues the run of downside surprises for inflation across a string of countries, which has seen the commodity currencies underperform.

Asian currencies continue to be helped by a strong RMB (yesterday's fix was at a record level). One year ago, the Nikkei 225 index stood at 8,600 with the Dow Jones Industrial Average at 12,500.

For a brief period before US markets opened yesterday, the Japanese stock market index was higher than its US
counterpart, having risen almost 80% over the last 12 months.

The impact of QE in the US and the BoJ's QQME programme has been remarkable. In a busy day offshore, the two day BoJ meeting conclude, the Minutes of the May BoE Meeting are released, the Minutes of the May 1 FOMC meeting are published and as stated above, Bernanke delivers his Economic Testimony to Congress.
Economic Calendar
22 MAY AU Westpac Consumer Confidence May
JN BoJ Target Rate
US Fed's Bernanke Testifies on Economic Outlook