Bell FX Currency Outlook: The Australian Dollar has regained some lost ground overnight as the market digested the Reserve Bank of Australia's decision to leave the cash rate unchanged yesterday at 3.00%.

Australia: The AUD/USD fell to of 1.0370 yesterday, but found support ahead of the low of 1.0360 last week, and rebounded early today amid a rally on US stock markets, with the Dow Jones moving close to a fresh five-year high.

This risk-seeking environment (here as well locally with sizable moves out of cash into equities) is lending support to the AUD.

The RBA Board's statement suggested the Bank is comfortable in "assessment mode", and is waiting to see whether the policy easing to date is sufficient for a pick-up in the non-mining sectors of the economy, to offset the expected moderation in mining investment.

Watch for incoming labour market data and the outlook for non-mining investment as a real guide for the cash rate from hereon.

The CAPEX survey (28 February release) is being touted as having significant importance, as it includes initial estimate
of investment intentions for businesses in 2013/14.

In Australia today, the main local driver for our AUD will be the December retail sales data which is released at 11:30 AEST.

Nominal retail sales are expected to have remained modest but better than the very weak outcomes in the previous two months.

Expectations for Q4 retail sales volume is for a marginal increase of ~ 0.2% for the quarter.

Majors: The US Dollar was slightly weaker following a risk-supportive print in the US non-manufacturing ISM data for January. The EUR was strong against most currency pairs, with a broad pick-up in the euro zone services PMIs seeing the previous day's unwinding of EUR crosses checked.

An ECB Governing Council member commented that the EUR reflects economic fundamentals and this was taken as supportive as it implied no official interference in the market.

Elsewhere, better market sentiment saw European and US equity markets record solid gains overnight with economic data providing support.

Services sector PMIs in January improved in China, India, Europe and the UK, while the ISM nonmanufacturing
index was better than expected at a solid 55.2.

Economic Calendar
06 FEB AU Dec Retail Sales
EC ECB Releases Bank Lending Survey
GE Dec Factory Orders
US MBA Mortgage Applications

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