The Australian Dollar has opened just under the 1.0500 level as financial markets await a final resolution with a group of private creditors who hold some of the Greek sovereign debt.

Australia: Markets were looking for some announcement over the weekend and before a meeting of European finance ministers that begins later today but as yet nothing has been resolved. Reports suggest that the sticking point is what new rate Greece will pay on new bonds. The next bond payment is due on March 20. The AUD benefitted from some good earnings results from US global companies Intel and IBM while better housing sales from the US continued the better economic tone coming out of the US.

China’s HBC flash PMI data for January was 48.8 slightly up from last month although there were better figures for new and export orders. We will see no other data from China this week since all markets are closed for Chinese New Year (Year of the Dragon). In the near term, we expect to see further easing in the reserve lending ratios that banks need to leave with the Chinese central bank.

In Australia, today we will see what the PPI figures for 2011 Q4 look like (the market expects a figure of 0.4%) and on Wednesday the CPI for Q4 is announced where a figure of 0.5% for underlying inflation is the norm. The near term path of the vAUD is very much tied to results of the discussions on the Greek debt situation.

Majors: With equity prices in the US marginally higher after small losses in Europe, oil weakened off as much as 2.1% for WTI crude to US$98.30 a barrel as the Chinese PMI data was flat and the market awaited theoutcome of talks on the Greek debt situation. US home sales were up 5% in December which is the largest rise in the last year. Later this week the US FOMC will release their first forecast of the future path of interest rates. They have said in the past US rates will not rise until at least 2013 and now some commentators are saying the first rise will not come before Q1 of 2014. 30 year fixed mortgage rates continue to fall and stood at 3.88% at the end of last week. Although the immediate focus remains on Greece in Europe and the markets are hoping for a positive negotiated restructuring, Portuguese bond rates have blown out to 14.6% pa of late as a reminder there are many other problems in Europe.

Economic Calendar
23 JAN AU Producer Price Index Q4
EU Euro-Zone Consumer Confidence JAN
Foreign Ministers meet in Brussels
UK MPC’s Posen speaks in Nottingham