Bell FX Currency Outlook: The Australian dollar continues to hold on to recent gains, trading around USD1.0350 this morning.

Australia: The AUD held up well overnight in the face of ongoing EUR weakness. The local unit remains vulnerable to headlines out of Europe but for the moment the market appears quite content for the AUD to trade well above parity against the USD. Resistance is building around USD1.0400 and this level is expected to hold today.

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Against the EUR, the AUD continues to record new highs on an almost daily basis. This morning AUD/EUR has traded through EUR0.8000. Currency predictions for 2012 are beginning to emerge with most experts predicting the AUD will perform well throughout the year due mainly to Australia's AAA credit rating and our relatively high interest rates. Of course, most predictions are also highlighting the potential risk in relation to Europe and the risk this could potentially pose for the AUD.

Majors: More bad news out of Europe overnight, while in contrast, the news out of the US was a little more encouraging. News that Italy's biggest bank, UniCredit SpA, is planning a heavily discounted EUR7.5bio share offer helped fuel concerns that Europe's debt crisis is far from under control.

Adding to the concerns, Spain's El Pais newspaper reported that the Spanish Government helped the Valencia Government make an overdue payment of EUR123mio to Deutsche Bank. Speculation is growing that the Spanish Government may need to seek loans from the EU's rescue package and the IMF.

Given the current outlook, further EUR losses appear likely. US equity markets consolidated recent gains following the release of healthy vehicle sales for December and a rise in factory orders in November. After a recent run of positive data out of the US, speculation is growing that the world's biggest economy may finally be showing some signs of life.

Economic Calendar
05 JAN AU AiG Performance of Service Index Dec
HIA New Home Sales NOV
EU Euro-Zone PPY NOV
US ISM Non-Manufacturing Composite DEC
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